Mortgage-backed securities (MBS) are financial instruments created by pooling together multiple home loans. Investors buy these securities, which represent a share of the cash flows from the underlying mortgages, typically in the form of monthly payments made by homeowners. These securities allow banks to free up capital, enabling them to issue more loans. MBS can vary in risk and return, depending on the quality of the underlying mortgages. They are often traded in financial markets, providing liquidity and investment opportunities for various types of investors.