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.

(minute 17)

“Like many great financial innovations, FNMA and FHMC were invented by the government.” —John Geanakoplos

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