An asset-based security (ABS) is similar to a mortgage-backed security (MBS). Both are securities that, like bonds, pay a fixed rate of interest derived from an underlying pool of income-generating assets—usually debts or loans.

The value of MBS is secured by the value of the underlying bundle of mortgages that are pooled by issuers for sale to investors. MBS are issued or guaranteed by the U.S. government or a government-sponsored enterprise (GSE), or by private institutions.

Asset securitization is the structured process whereby interests in loans and other receivables are packaged, underwritten, and sold in the form of “asset- backed” securities.

This distinction is common in the United States, for example, where typically the term “mortgage-backed securities” refers to securities backed by high-quality real estate mortgages and the term “asset-backed securities” refers to securities backed by other types of assets.