Modified Pass-Through Certificate

See: Pass-Through Certificate.

You hold a pass-through certificate. It gives you dips on some of the payout from a pool of assets, usually mortgages. So...a group of homeowners pay their monthly mortgages. All those mortgage payments get collected together into a big pool of money. That money is then passed through to you and the other holders of the certificates.

The modified pass-through certificate adds an additional level of security. Under this arrangement, you don't have to worry about the homeowners paying their mortgages. You get your money either way. The issuer of the modified pass-through certificate guarantees the payments, whether or not the homeowners send their checks in on time.

In other words, the issuing party takes on the risk of default. The certificate holders get paid no matter what.