How to split up a mortgage into pieces. Take $1000 of payments and split it up into:
- floater $400 + interest rate
- inverse floater $400 − interest rate
- equity $200 of first-risk payment
These three can be sold to different types of customers, for more than $1000.
“Like many great financial innovations, FNMA and FHMC were invented by the government.” —John Geanakoplos