Those are essentially derivative securities that are derived from mortgage backed securities.

Welcome to my presentation on mortgage backed securities.

I have a whole video on mortgage backed securities.

And they rate these assets, these mortgage backed securities.

CDOs, collateralized debt obligations, are derived from mortgage backed securities.

And so money came from when the owners of each of these mortgage backed securities each, let's say, paid 1,000 for the mortgage backed securities.

You call them stock, or stock options, derivatives, mortgage backed securities.

Welcome back to my series of presentations on mortgage backed securities.

And these shares would be called Mortgage Backed Securities. or sometimes MBSes.

Well it comes from the investors in the actual mortgage backed securities.

Maybe they'll buy mortgage backed securities, so it makes the mortgage market a little bit looser, a little bit more liquid.

This is highly rated mortgage backed securities, maybe they have a slightly higher interest rate.

It made a mint by selling mortgage based securities and more complex financial instruments to unwitting buyers.

You might just want to watch the video on mortgage backed securities and collateralized debt obligations if you need a refresher there.

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

Something about phony securities.

They're fairly liquid securities.

It can buy Treasury securities, so instead of short term Treasury securities, maybe it could be longer term Treasury securities.

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.

They didn't find some subprime individual that was willing to bid up the house.

And I know that you have some type of assets, you have some of these residential mortgage backed securities, or you have some of these derivative assets there.

So in exchange it gets treasury securities.

And equity securities you're probably familiar with.

We're from the Securities and Exchange Commission.

But you should watch the videos on mortgage backed securities and collateralized debt obligations, if you want to get a better understanding of exactly how the money flows go.

You've paid off your mortgage.

Actually a mortgage, a borrower.

The original mortgage is 750,000.

Mortgage department, First National Bank.

They borrowed it from their local mortgage broker, who then sold it to a bank, or to an investment bank, who created the special purpose entity, and then they IPO the special purpose entity and raise the money from people who bought the mortgage backed securities.

I suffered from my mortgage loan.

And we also have a mortgage

I can't pay this mortgage anymore.

Think Enron, Madoff, the mortgage crisis.

You don't pay any mortgage payments.

Of course, the mortgage brokers at

They can't afford a mortgage anymore.

They have no money down, 1 million loan, subprime, negative amortization, they had no credit rating, etc, etc.

My house is a mortgage free house.

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

I just can't pay this mortgage anymore.

Maybe people aren't getting mortgage loans still.

So what is a mortgage backed security?

What CDOs are, you take these mortgage backed securities, you know, they're loans to some people in some region of the country, or maybe they're diversified across regions, then you slice and dice them.