We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Generic Security?

Malcolm Tatum
By
Updated Jan 30, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Generic securities are mortgage-backed securities that make use of loans or mortgages that have been issued within the last calendar year. Typically, a generic security is slightly lower in value than a seasoned security, which is a mortgage-backed security that utilizes loans or mortgages that have been in existence for more than one calendar year. While the value of these types of securities is lower than the older investment options, generic securities are also priced lower and may be attractive to a number of investors.

One of the main reasons that a generic security is issued at a lower rate is that the underlying mortgages or loans backing the security have not been in existence long enough to be considered stable. This is because the incidence of default on these types of debt obligations is traditionally understood to be higher during the first twelve months after issuance. Once payments on the debts have remained current during that first year, the confidence in the stability of those loans and mortgages increases. This in turn affects the value of the generic security, allowing it to be considered stable or seasoned.

While the value of a generic security is lower than other mortgage-backed options, the purchase price is also somewhat lower. This helps to offset some of the risk that investors assume by purchasing a security where the underlying assets have not proven to be stable. Investors who believe that the underlying assets connected with the security will survive that first year and that the return is worth the risk assumed will often find that investments of this type can be profitable.

As with any type of investment activity, investors should look closely at the nature of the debt obligations that provide the support for any generic security. Taking the time to understand the nature of those loans and mortgages and get an idea for the potential those debts carry to be settled in a timely manner will make it easier to focus attention on investments that are more likely to earn a return. At the same time, this type of activity will also increase the chances of identifying a generic security that is backed with loans and mortgages carrying a higher degree of risk than the investor finds comfortable. Assuming the investor is correct in his or her estimation of the stability of those underlying debt obligations, the effort to carefully evaluate the viability of the investment can prevent losses while also allowing the investor to move on to an option that shows more promise.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.