25 Comments

  1. I still dont understand why the tradtitional bank would sell the rights to
    the loan payments for the same price they issued them for. Something about
    fees? Is this still used today or is this just for historical references?

  2. Yeah, but what happens when the housing market is saturated and that
    property can’t sell for enough to pay for the $1 million loan? You get
    2008…

  3. @honest 4truth i fink the investment banks set up the special purpose
    vehicles/entities (spv/spe) so they cud get the loans off their balance
    sheets. in this video he says investment banks may have done this because
    they are not in the business of dealing with mortgage loans however i rekon
    that they knew a number of these loans were very very risky and so
    transferred this risk onto shareholders, mutual funds, hedge funds and
    pension funds etc.

  4. Hi there, can somebody answer me. Why doesn’t the investment bank use it
    original $1B to buy the shares and sell it out for $1.1? I don’t see why it
    has to give the commercial bank $1. Many thanks in advance

  5. Correct. These 10% years are just the interests, summing up to 1B in 10
    years – which is just as much the bank gave to you so the bank would not
    make any profit. So you actually give the bank 1B in interest + the 1B loan
    itself = 2B. Its a quite high interest rate :P

  6. wait a second, with a system like this, could a homeowner buy a share into
    his own mortgage? Essentially paying himself, but with the bank as the
    middle man reaping most of the profit? F***ing bankers!

  7. @tml337 They pay $1100 up front to get $100/year for 10 years. So they get
    a total of $2000 paid back at the end of the 10 years. ($1000 principle +
    $100/yr * 10 yr interest payments). This is appealing to pension funds or
    retirees bc they get a steady stream of interest payments.

  8. The problem is that the original mortgage is resold in bulk and finding the
    true owner of the note is next to impossible sense the original bank is
    still accepting the payments however in a foreclosure the bank that is
    suing will dodge any attempt to produce the original note but luckily most
    state laws forbid this illegal practice if a person stands up to it. Break
    it up a million ways but the owners of the note better show up in court in
    person so a defendant can confront his accuser.

  9. I personally think that Sal is so successful because of his methods too. I
    agree with you on the fact that a proper understanding of the subject is
    fundamental but I assure you that teaching methods are very important too.
    Right now I am an engineering student in Italy and many of my professors
    know their subject from top to bottom but have no clue on how to trasmit
    their knowledge to the students. Having also studied in an international
    school I can tell you that teaching methods are essential.

  10. Christian Bernhard Holth Thorjussen on

    Why would the small commercial bank sell its loans when it would earn much
    more by keeping them and collect the payment stream from the borrowers?

  11. Scott Wilkinson on

    The 1st bank makes money from giving out Loans. They charge us Fees on top
    of those Loans. If we get a $100,000 loan, there might be $2,000 of Fees we
    need to pay the Bank to make the transaction happen. The fees are separate
    from the loan. The more loans the 1st bank can make, the more money they
    can make on fees. They need the investment banks to buy our loans in order
    to have the cash to make more $100,000 loans. That’s a great question, I
    hope that helped.

  12. Why would the investor slash new shareholder pay $1,100 up front to only
    get $1,100 over time? I’m gonna assume you meant that they pay a lot less
    than that but that the investment bank that created the corporation still
    makes more than what they spent.

  13. just got one question and hopefully you can answer it soon enough for it to
    help… why does the INVESTMENT BANK (green bank) make up a corporation
    which sells shares letting investors bank off the interest and principle
    payment as well? and therefore making only 100 M (in this case), when, if
    they kept the rights to the mortage payments to themselves, theyd
    eventually be making 2 billion dollars (in this case)? provided the
    investmEnt bank had enough money to buy the rights from the LOCAL BANK

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