Very well explained ! According to the number of views and the positive comments , people do wait for more videos from you. Regards from Helsinki , Finland.
It wasn't detailed enough to be a one-stop explanation, but whatever you explained, you did so pretty well. All of your videos are exactly out of my curriculum too, lol, so I think I'll get through them before moving on. Thank you!
Banks don't lend money they purchase securities from the borrower. The bank buys the promissory note from the borrower and lends the borrower his own money. Read Modern Money Mechanics page 6.
Hi , thanks for taking the time to explain this. can I ask why the mortgage can't be traded before it becomes an MBS ? besides the obvious small investment the single mortgage would offer,
If I hold a mortgage with a bank and they're secretly enriching themselves off of my pledged home and mortgage payments, shouldn't I be entitled to at least a fair share of the income gains stemming from the Mortgage backed securities?
Do you feel corporate bonds will have the same fate as MBS, and if so, would you advise shorting the stock of companies that carry billions of bonds on their balance sheets while at the same time are not making a profit?
If the interest, which is the income to the lender, just passes through the mortgage backed security and the investment bank holds it, how is the investment bank making any money? I realize that the investors are paying the IB to invest in the MBS but aren’t they just ultimately giving back what the IB paid to the retail bank to create the MBS from the hundreds or thousands of mortgages purchased from the retail bank?
Why does the risk of pre-payment change just because entity B is holding hundreds of mortgages rather than the original bank holding hundreds of mortgages? Even if entity B gathers mortgages from multiple banks, the percentage of those pre-paying wouldn’t necessarily change. If one out of 10 mortgages is prepaid or 1000 out of 100,000 mortgages are prepaid, the percentage is the same and the impact on the overall flow of money is the same, percentage-wise. I’m not saying she’s wrong, just asking questions to clarify what I don’t understand.
I wish it had been explained what’s in it for the bank to do this as far as making money goes because it looks like they wouldn’t get the interest paid by the borrower since it goes to the investor.
To the extent that the future is unpredictable one could just as well expect interest rates to go up as go down. Yet Wall Street seemed to coalesce around the assumption that interest rates would continue to go down for the foreseeable future. Why did they anticipate perpetually falling interest rates ?
I don't understand something. How much does a bank sell the box to investors for? ie. the "IPO" price. Is it exactly the principal amount + interest? Then the banks are taking all the interest value, leaving nothing for the investors...so why would investors bother buying such a security?
So usually at issuance price is par or a slight discount from what I've seen on prospectuses (99.999998). the investors are getting interest... and pricing is usually done by taking the NPV of all the cashflows at a certain discount rate/original face
Don't know if this reply will ever reach Shayak Dutta, but MBSs are pass-throughs: all of the principal is passed through, and some of the interest. The rest of the interest is retained by the originator or sponsor. So consider a 5% $1000 loan that backs a 4% $1000 MBS. The investor pays $1000 for the bond, and earns 4%, secure in the concept that the MBS is supported by a loan secured by a mortgage over a residential property. When loan repayments are received, all of the principal is paid to the investor, so eventually the investor gets back her $1000. The investor also earns interest at 4%, with the rest retained by the sponsor. There are some other pieces to the transaction, but this captures the essence as it pertains to your question.
What was the benefit of bank and investment bank who provides loan to individual in 1st instance - if later it is bundled and sold it to investors as a security. As ultimately investors is the 1 who received interest and principal amount.
After the 90 days on the 91st day the bank gets the full amount of payment for the house in full from the Insurance Company...Then they sell the loan Bayview, M&T, SPS, to whomever wants to buy it.. then it's in the bubble she talking about
Clear, concise and interesting. However, there is MUCH about the ‘evil’ side of securitisation that you failed to mention. Be it by choice, or lack of knowledge. Although, you did hit one nail on the head: “... without the borrowers knowledge...” (this occurs) So, how about take a minute to reflect on that... Along with the FACT that ‘banks’ (which, by its correct definition, being somewhere one can DEPOSIT MONEY- which nowadays does NOT happen- thus- deception number 1) DO NOT LOAN MONEY!!! (Please... do your research on this! There are many court cases and other factual evidences to confirm this! One such document is called “Affidavit of Walker Todd”- an ex- Fed reserve lawyer who blew the whistle to confirm there IS NO MONEY! It’s a lie perpetuated by the fake banks to trick the people into continuing to deposit their hard earned ‘money’ (promissory notes) and he states it is just “made out of thin air...” Then, as you stated, the fake banks don’t inform its CLIENTS they are going to DOUBLE DIP and make MASSIVE (digital) PROFITS by securitising their negotiable instruments (signed mortgage) by trickery and deceit... certainly not with lawfully, and legally required FULL DISCLOSURE. All parties are deceived... and the fake banks profit other ways too, also not mentioned here, and neither can I be bothered to write now, but suffice to say the fake banks have numerous other ways to siphon money from the consumers AND investors, that ignorantly/ naively enter their ‘den of deceit’ Please people, PLEASE, do your DEEP research into all this. Don’t be fooled, or deluded into thinking this is anything other than a scam by the banking industry. Here’s a few thoughts: 1. Why DONT ‘banks’ inform its clients they will securitise THE CLIENTS PAPERWORK?? 2. No one has authority to on-sell any property they don’t own. Securitisation is doing exactly this. 3. ‘Who’ then OWNS the debt? May you all see the truth. God speed.
