Collateralized Debt Obligation CDO : a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets. Mortgage Backed Securities MBS : s a type of asset-backed security that is secured by a mortgage or collection of mortgages. Commercial mortgage-backed security CMBS : a type of asset-backed security that is secured by commercial and multifamily properties such as apartment buildings, retail or office properties, hotels, schools, industrial properties and other commercial sites. The properties of these loans vary, with longer-term loans 5 years or longer often being at fixed interest rates and having restrictions on prepayment, while shorter-term loans 1—3 years are usually at variable rates and freely pre-payable.

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More than one-third of the loans were in California, then a hot market. Most of the information in this article is based on our reading of various public filings. The average equity the second-mortgage borrowers had in their homes was 0. It gets even hinkier. Some 58 percent of the loans were no-documentation or low-documentation. This means that though 98 percent of the borrowers said they were occupying the homes they were borrowing on -- "owner-occupied" loans are considered less risky than loans to speculators -- no one knows if that was true.

You can see why borrowers lined up for the loans, even though they carried high interest rates. If you took out one of these second mortgages and a typical 80 percent first mortgage, you got to buy a house with essentially none of your own money at risk.

It was go-go finance, very 21st century. There are trillions of dollars of mortgage-backed securities in the world for the same reason that Tyson Foods offers you chicken pieces rather than insisting you buy an entire bird.

Tyson can slice a chicken into breasts, legs, thighs, giblets -- and Lord knows what else -- and get more for the pieces than it gets for a whole chicken. Customers are happy because they get only the pieces they want. Create an account or log in to see what your friends are doing. Five myths about Ron Paul A new model of empathy: the rat 2, people recommend this.


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Evil, pinky-positioned in his mouth, saying that? I think we need to know a little bit more about this guy Prior to being appointed by George W. In addition to the 3. At the time, Paulson also owned options to purchase an additional , shares of common stock, all of which are exercisable meaning he could cash out at any time, exercising his right to even more money! Goldman obviously thought highly of their CEO to compensate him this way, so what did Paulson do for Goldman to have earned him well in excess of half a billion dollars? I hear Dr.


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