A large amount of home mortgages are purchased and pooled together.  The home owners pay interest and principal monthly on their mortgages.  Bonds are issued from the pool of mortgages, using the mortgages as collateral. The interest payments and bond principal payments for these mortgage-backed securities (MBS) originate from the mortgage borrowers and flow through the pool of mortgages. As the home owners pay off their mortgages over time, the MBS are also paid