Final answer:
A residential mortgage-backed security (RMBS) is a financial security that is created when a financial institution sells a pool of residential mortgage loans to investors. Investors receive a rate of return based on the payments made by the borrowers on the mortgages.
Step-by-step explanation:
A residential mortgage-backed security (RMBS) is a type of financial security that is created when a financial institution, such as a bank, sells a pool of residential mortgage loans to investors. These loans are securitized, which means that they are bundled together and sold as a single investment product. The investors in RMBS receive a rate of return based on the payments made by the borrowers on the underlying mortgages.