Pass-through
Asset-Backed Securities glossary · Asset Backed Securities
Definition
A security in which cash flows from the underlying assets are passed directly to bondholders, typically pro rata.
Pass-through in plain English
A "pass-through" is the simplest kind of bundled-loan security: you take the monthly payments from a big pool of loans (say, thousands of mortgages) and hand them straight to investors, minus a small servicing fee, without reshuffling anything. "Pro rata" just means everyone gets a slice matching how much they own, so a 1% owner receives 1% of every dollar collected. It's like a group of neighbors who own a rental house together and simply split each month's rent by ownership share. The appeal is transparency, whatever the borrowers pay, investors feel directly, good months and bad.
Learn these first
Practice Pass-through
Related Asset-Backed Securities terms
Asset-Backed Securities practice questions · Asset-Backed Securities flashcards · Asset-Backed Securities study guide