asset-backed security

A fixed-income security that is collateralized, or backed by, mortgages, credit card or other receivables, installment contracts, or by some other type of asset. These securities have become increasingly popular during the last several decades. Government-sponsored entities, such as Fannie Mae and Freddie Mac, have issued an increasing amount of ABS securities that are backed by home mortgages. By removing those mortgages from their balance sheet, the agencies are able to loan additional money so that more people can receive home mortgages.