Net interest margin securities

Net interest margin securities (or NIMS) is a type of financial instrument related to a securitization.

For example, New Century Financial Corporation -- the subprime mortgage lender that went into Chapter 11 bankruptcy in April 2007 -- sells the cash flows it receives from its mortgages in what is known as a mortgage backed security (which is basically a bundled set of loans that is sold to investors -- similar to a bond). Any excess cash flows derived from the mortgage receivable (after the investors of the mortgage backed security have been paid) is referred to as the "residual interest in securitizations" or just "residual." A NIMS is the sale of those residuals.


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