A security (a mortgage-backed security, MBS) that is created from pooling mortgages (mortgage loans, as underlying) and sells shares or participation certificates (PCs) in the respective pool to the investors. The cash flows from the collateral pool (payments of interest and repayment of principal) are “passed through” to the  investors (security holders), typically on a monthly basis. In other words, an issuer of a pass-through or participation certificate collects payments from the borrowers whose loans/ mortgages form a specific  pool and “passes through” the amounts to holders/ investors, after deducting any servicing and/ or guarantee fees.

The issued shares or certificates trade in the secondary market. A mortgage pass-through security is the simplest structure of a mortgage backed security. Most of these securities are backed by fixed-rate mortgage loans. However, collateral pools may also include of adjustable-rate mortgage loans (ARMs).

It is simply known as a pass-through or for short as an MPTS.