I suffered from my mortgage loan.

Let's say you take out a 200,000 mortgage loan.

He had to mortgage all his life savings to make a bank loan.

50 of the original value of the loan.

But the average house anyone who's traded mortgage bonds will tell you the average mortgage loan has a 10 year expected life.

What I want to do in this video is go over the math behind a mortgage loan.

local bank for a loan this is me again I would go to my local mortgage broker.

loan, because this isn't a traditional loan, an interest only loan but for the sake of this presentation, how it's different than a mortgage backed security, the important thing to realize is that the bank would have kept the loan.

The mortgage...

loan to Bank A.

loan to Bank D.

loan money to anyone.

Loan to Entrepreneur D.

Let's say this loan, the loan from Bank B to

Or enough of a loan to pay off that loan.

Mortgage backed security.

But essentially what happened is the investors in the mortgage backed securities provided the money to the special purpose entity to essentially loan to the borrowers.

And then I pay a little bit to chip away at the whole value of the loan.

So if I take a loan from someone, I owe them interest, or I have to pay them back the actual value of the loan one day.

I'll have to take a 750,000 mortgage.

So she has to give 10 percent of the mortgage of the total value, or about 400 dollars in savings.

Welcome to my presentation on mortgage backed securities.

I'm on loan to the firm.

Because this 500,000 loan is not an unsecured loan.

And this new loan is the most senior loan.

So I'll give out a 2,000 gold piece loan to that person. 2,000 loan.

You've paid off your mortgage.

Actually a mortgage, a borrower.

The original mortgage is 750,000.

Mortgage department, First National Bank.

So 900 loan.

Whose loan out?

So I have a loan, 100 loan. That's my asset.

Pay off the old loan, and get a new loan.

And then that first loan shrinks to 50 only and then that second loan shrinks to 50.

Because even though there is good uses of capital, if you were to give someone a loan, they could use that loan to actually create value by planting seeds, or by building a factory.

To value

I have to write that down. or 80,000 mortgage.

And this is what you probably read some articles about, these hedge funds with these computer models to value their mortgage backed securities.

He wants to pay off his loan.

loan to Bank F, it comes due.

Garnet said she'd loan it to us.

And now notice something here, the book value of this residential mortgage backed security, at least what this bank management says the book value is, is 4 billion.

And we also have a mortgage

I can't pay this mortgage anymore.