huh? mortgage-backed securities explained

image courtesy of here

okay, this gets a little more complicated, so hang on.

when housing prices were rising in the late 90’s, many people purchased homes with sub-prime loans due to a confluence of factors: 1. they believed housing prices would continue to rise and they would be able to re-finance at a more favorable rate in the future 2. banks realized they could charge much higher origination fees for sub-prime loans and so encouraged people without adequate education to apply for a sub-prime loan 3. everyone got a little greedy.

the goal of homeownership is basically the bedrock of the american dream, so it’s hard to really blame anyone for allowing more americans that experience. regardless, when the percent of sub-prime loans skyrocketed, financial institutions realized they could spread the risk of defaulting around by packaging the sub-prime loans into mortgage backed securities.

let's break it up to explain. a security is an instrument of financial value; stocks and bonds are securities. a mortgage backed security is where a bunch of mortgage loans are grouped together to create a large pool of debt. this debt is then sold to investors the same way a bond is; you buy it at a discount and rely on the mortgage payments for the payout. it was supposed to be a relatively safe investment, partly thought so because of these odd rating rules for bond insurers (i’m sure you’ve heard about this), and because some of these mortgages were structured so that people ended up paying MORE than they were borrowing, it sounded like a great deal.

the primary holders of these mortgage-backed securities (and there are also these other very complicated things called collateralized debt obligations , or CDO’s, which are made up of various types of mortgage related securities) were corporate and institutional investors and investment banks like Bear Stearns, who bought them in droves during the height of the real estate boom, often touting them as “undiscovered gems”.

tomorrow we'll look at the fallout and how the government is getting involved.

a very good place to start: interpreting financial news

there’s big news in the markets this week. to understand what is happening to bear stearns, and the implications of the federal reserve’s actions, let’s start at the very beginning.
(in my head i hear maria’s voice from "the sound of music"- anyone else?)
sub-prime mortgages/sub-prime loans
these buzzwords have been at the root of much of this financial turmoil; but do we really know what they mean? here’s the straight story.

if you are interested in buying a house, you usually need a couple of things: 1. a good credit score (usually above 650 FICO score) and 2. a down payment that is usually between 10%-20% of the purchase price of the home. if you don’t have either of these things, you can still buy a home, but since you don’t qualify for a prime mortgage rate (this rate fluctuates, but has been around 5% for the past 5 years), you have to get a sub-prime loan. a sub-prime loan will have higher origination costs and a higher interest rate than the 5% you would get as a prime borrower, because you are more of a risk to the bank to lend to.

this is a really important lesson for us twenty-something’s who don’t really understand the importance of a credit score. in the financial world, your credit score is the single most important factor people look at when making financial decisions about you. take care of it! (i’ll post about credit soon)

many of these sub-prime mortgages take the form of adjustable rate mortgages, which is probably another term you’ve heard a lot about. an adjustable rate mortgage adjusts its rate (duh!) over time, so you may start out with a 5% mortgage that shoots up to 10% after 4 years. These can mean the difference between paying a $750 monthly mortgage payment for a couple of years and one day opening your mail to find out your monthly mortgage payment has shot up to $3,500. there is obviously great risk that the borrower will default in this situation, which the banks soon realized and created the derivative product of mortgage backed securities to spread the risk around.

this brings us to mortgage-backed securities, which i will unpack tomorrow. hopefully, by the end of the week we will all have a much better understanding of what is going on and more importantly, how this is going to affect us.

dusk and rain

in virginia this past weekend grace took these photos. it had been raining all day and the sun peeked out just at dusk. it will be nice to look at these again and again over the next couple of weeks as life resumes its dizzyingly hectic pace.

pie for pi day

obviously i'm a total dork (although, i didn't do "odyssey of the mind" so maybe that's a little redemption) and secretly in love with math because in honor of pi day (3.14- get it?) i made the most wholesome of pies- deep dish apple. hopefully i'll get listed on alanna's kitchen parade pi day party!

when reading the epicurious comment thread on this recipe one comment caught my eye-

"YES ,THIS IS THE PERFECT PIE RECIPE. I ADDED 1 1/2 CRUSHED HEATH BARS,OR (ENGLISH TOFFEE) about a fist full.TO THE FILLIING. It knocked the socks off everyone , even yankees' fans. Try It!"

(i apologize on behalf of this person for the spelling/punctuation/capitalization disaster)

uh? heath bars? IN an apple pie? this may be the most inspired idea i've ever heard. i was all excited to try this until grace put the kibosh on it- reminding me that i have my health to worry about and i can't continue eating like a crazed person forever without serious ramifications. oh right. (those of you with a less conscientious partner can go ahead with the heath bars. and then invite me over.) regardless, the apple pie idea was still on and the evening was spent peeling, chopping and rolling.

by the end of the night, i had this to show for it. sadly, you can't properly see the three tiny pi symbols baked right into the crust. i'll have do more experimenting.

to spite grace, we didn't even eat it with ice cream. a deep dish tragedy. tonight, i'm piling on the ice cream. don't tell!

deep dish apple pie , adapted from epicurious

3 tablespoons flour
lemon zest from half a lemon
1 teaspoon ground cinnamon
1/4 teaspoon allspice
1/8 teaspoon salt
2/3 cup white sugar
1 tablespoon turbinado sugar
4-5 sour apples, peeled, cored and cut into 10-12 wedges per apple (i used granny smiths)
4-5 sweet apples, peeled, cored and cut into 10-12 wedges per apple (i used fujis)
1 tablespoon lemon juice
i tablespoon butter, cut into 1/4 inch pieces
pastry crust (i used a frozen one that i already had)
1 egg, beaten

put a large baking sheet on the middle rack of the oven and preheat to 425F.
whisk together flour, 2/3 cup sugar, zest, spices and toss with apples and lemon juice.
pour mixture into rolled out pastry dough in pie plate
roll out remaining piece of dough and cover pie. cut around the edges with scissors then crimp decoratively. i used my left over dough to make the pis.
brush entire pie with egg wash and sprinkle with turbinado sugar. cut three steam vents on top with a sharp knife.

bake pie in 475F oven for 20 mintues, then reduce heat to 375F for another 40 more mintues, or until it looks and smells ready. you may have to use foil around the edges of the pie pan to keep the crust from burning.


5 organic granny smith apples: $2.32
4 organic fuji apples: $5.41 (these are WAY more expensive, because i didn't buy them at the co-op)
pastry dough: 2-3 dollars (you can make it for practically nothing, but if you buy it is usually around $2.50)

total: $10.23. let's bump this up to $12 considering the egg, butter, etc. for a six piece pie, this comes out to $2 per piece, which is actually pretty expensive for a homemade dessert. that's what i get for not shopping at the co-op. however, this is what i get for my efforts. yes, it was good.

crazy asian treats

in the same vein as those crazy asian pizza crusts (thanks robyn and john!), here's a link to a business week article (via serious eats) about more crazy asian treats.

the marketing/tailoring of "western" food from large chains to the international market is so fascinating, don't you think? despite the high costs of recipe development and increased training/production, businesses are still willing to modify their apparently "consistent" taste for the benefit of a new market. this is particularly interesting when you consider the fact that the draw of many of these places is to have a similar product halfway around the world. it just goes to show that when there is money to be made, crazy things can happen. these candy bars are a great example.

i'm actually very interested in the red bean kit kat bar, as well as the chocolate flavored cheese, which is apparently a huge enough hit to inspire copycats. it looks totally disgusting, but on the other hand, who am i to judge? i love cheese flavored ice cream. i guess there's no accounting for taste.

Adding an Asian Flavor to Chocolate via Business Week

banchan, esp. kimchi

(boo to blogger for not knowing how to do automatic blog posts!)

i've mentioned my love of korean food before but only recently realized just how perfectly it encapsulates all my foods needs and how it is indeed my perfect cusine.

not only does it have has bold flavors- mostly due to the very savory (and probably umami heavy) red chili sauce that is the base of many casserole dishes, and a mix of textures- i hate uniformly textured food and love the classic crunch of cool lettuce wrapping up the bulgogi or the crispy rice at the bottom of the hot stone pot- but it also relies heavily on my most favorite of condiments- vinegar. being filipino, loving vinegar is a birthright and i'm happy to douse just about anything in vinegar. white rice? better with vinegar. salad? just vinegar please, hold the oil. koreans also take vinegar very seriously, giving you a sampling of various pickled/vinegar dishes before every meal.

this brings me to the other reason i really love korean food- banchan. while korean food is not cheap, it does afford many different tastes FOR FREE at the beginning of every meal. like a chips-and-salsa offering on steroids, the banchan that korean restaurants serve at the beginning of every meal can be as numerous as 7 or 8; different tiny dishes of pickled radishes, salted fish, fermented beans, steamed egg, etc etc. the only thing certain about the banchan is that the ubiquitous korean staple, kimchi, will always make an appearance. what other cuisine gives you multiple tiny dishes for free, despite whether you order $15 or $50 worth of food?

my last point and the ultimate trump card: kimchi. cheap, filling, delicious; it is obvious that the koreans hold the last great culinary condiment. on the wikipedia post about banchan, it mentioned that many koreans don't consider it a meal without kimchi. i'm going out on a limb here, but i don't consider it a life without the inclusion of kimchi.

p.s. if you haven't had korean food and you live in nyc, email me and i'll be more than happy to go on the de-flowering dining experience with you. i can't wait!

article about kimchi in SF Gate

Banchan on Wikipedia

chinese watermelon seeds or butong pakwan

my most vivid childhood food memory concerns these tiny, salty treats. i was in the philippines for the summer, a common occurrence for me in elementary school, and i was keeping one of my elderly aunts company for the afternoon. my tita ditas (tita is the diminutive of tia, and the prefix to all of my aunt addresses) is a devout catholic, a wearer of hilariously ill-fitting wigs, and a lover of the telenovela. sitting in her room, surrounded by statues of saints, we lazily watched one episode after another. during one of the breaks, she pulled out a jar hidden behind her bed full of black seeds. having no idea what was going to happen, i was actually surprised when she offered me some to eat, demonstrating how to carefully extract the heart of meat from the salty shell. i already have a natural affinity for salty foods, like my father, and so i was immediately excited about these; i went home that day with wrinkly lips and a sodium headache.

now every time a family member comes from the philippines to visit, i always ask them to bring me these treats, and i try to be sparing in my consumption so i always have half a jar in the cupboard. i just ran out last week and no one is coming to visit until june, so i've googled and found you can buy some at my local asian market for very cheap. although, for some reason i just think they taste better having traveled halfway around the world.

housekeeping + money

a few quick fyi's:

-i'll be in virgina (see picture above) for the weekend taking a much needed mini-vacation. but not to worry readers! i'm all set up to post an asian food trifecta, in response to the fact that i'll be in just about the whitest place in the country. look forward to it.

-we'll be shifting focus a little on this blog to make sure you're all covered during these rough financial times. with tax season before us, and a recession looming, i want to make sure you all know what's what and can make sense of the crises that seem to occur almost daily. so in addition to my regular posts on financial advice (diversifying your savings is up next), i'll be posting a bit about markets, economic policy and what to do tips.

-speaking of tips, i just heard that some companies that are filing chapter 11 bankruptcy are able to suspend their acceptance of gift cards because of a loophole allowing the gift card income to be treated as a loan to the company. long story short, if you have gift cards/certificates stockpiled from the holidays, use it ASAP. a short list of companies that have filed chapter 11 recently included: the sharper image, lillian vernon, georgette klinger and fortunoff. in all honesty, it will probably actually get worse, especially for small businesses, so use those gift cards!

belgian waffles

one summer when i was about 13 or so, my family embarked on what was to be the requisite grand european road trip. part of this trip included a hilarious time in amsterdam where me and my 7 year old brother discovered both marshmallow shish kabobs and dr. mulluers sex world. another part of this trip included my father being so excited and proud to show us the manneken pis in brussels, which, for all of your edification, is basically just a life-size statue of a baby urinating. manneken "pis"- get it? the joke was super lame, but the rest of brussles, especially the food, more than made up for it. i very vividly remember the smell of baking waffles in air and being so so excited to have one, but sadly, i don't actually remember what they tasted like.

so when i found out about a waffle truck making the rounds in NYC, i was understandably excited. and when i learned it was run by real, live, authentic belgians, bringing straight-from-belgium recipes, i was SO THERE. so much there that i even traveled out of my beloved borough to the upper west side on the weekend for them. that's a 45 min. one-way trek, mind you. for all you park-slopers, there is a much easier way to get them, which is to just wait until the first saturday of the month, when they are posted at 7th and Carroll (in front of Key Food) all day.

they serve two kinds of waffles, the straightforward brussles and the more mysterious liege. the brussels is exactly what you'd expect in a high-quality belgian waffle- crisp, light, warm and uncomplicated. the real troublemaker (at least for my thighs) here is the liege, which is described in the menu as being "packed with sugar pearls". this all sounds very intriguing and potentially a little suspect, but honestly after having eaten these, i can't say i can describe it any better. this waffle is chewy, doughy and bursting with vanilla sugar crystals. topped with one of the various dinges like strawberry, dulce de leche, or whipped cream and a generous sprinkle of powdered suger, this is more a dessert than a breakfast food.

one last tip, pertaining to savings: the waffles are $4 each, and the toppings are $1. however, the kind folks who run this have set up a secret password that allows you to get a topping for free if you tell them the name of the sport played by a belgian who in 2001 became the world champion of this sport at the age of 64, 38 years after he won this title for the first time. you should look this up for the sake of it, but i'll tell you right here: three cushion billiards. you're basically MAKING money by reading this blog!

waffles & dinges

pasta with hashed brussels sprouts and pine nuts

although i love to read orangette, i very rarely make any of molly’s recipes. my taste leans more toward the bolder flavors and subtlety is usually lost on me, so when i came across this recipe at the exact time when i had a pound of brussels sprouts in the fridge and no plan for them, i figured it would be mediocre at best. there are very few flavoring components here- just some nuts and salt and pepper. it was a busy night and after putting the water on to boil and processing the brussels sprouts, i hopped into the shower, leaving grace to take over the recipe until i got out. lo and behold- this is so fast that when i got out of the shower it was already in the bowl, ready to go. and i usually shower for 5 minutes tops. grace was really excited about this meal, but i was a little more skeptical, until i tasted it. somehow the nuttiness of the pine nuts provides the perfect balance and crunch to the barely caramelized brussels sprouts. the touch of cream that holds it together adds a wonderful richness and with lots of salt, black pepper and grated cheese, we both declared this meal restaurant worthy. since, we’ve made it twice more, each time still in awe of how such a fast, cheap, easy meal, can be so decadent and dressy.

pasta with hashed brussels sprouts and pine nuts adapted from orangette

3/4 pound brussels sprouts, cleaned
5 tablespoons pine nuts
1 box dried fettuccine
3 tablespoons butter
2 tablespoons heavy cream
grated parmigiano-reggiano for serving

in a food processor fitted with a slicing disk, slice the brussels sprouts into a fine hash. set aside

place a large pot of salted water over high heat

while the water is heating, prepare the pine nuts. place a large, heavy skillet over medium heat. when the pan is warm, add the pine nuts, shaking frequently, toast until golden and fragrant. transfer to a bowl or small plate and set aside. set the pan aside as well, but do not wash it- you'll use it again in a minute.

when the water boils, add the pasta and cook until al dente.

while the pasta cooks, prepare the brussels sprouts. return the skillet to the stove and place over medium high heat. you'll want it to get quite hot. add the olive oil and butter. when the butter has melted add the brussels sprouts and salt. saute, stirring frequently, until bright green and just tender, about 4 mins.

drain pasta, but reserve 1/4 cup cooking water and add it to the skillet with cooked brussels sprout. toss the pasta with the sprouts, add pine nuts and cream and toss again- if pasta seems dry, add a splash or two of cooking water. season with salt and pepper.

serve immediately, with grated cheese and additional salt at the table.


here's a way to understand that even when you cook at home, things still cost money. i'll post the cost breakdown of each meal, and you'll be able to make yummy food even when you're broke...although, if you're reading my other posts, you shouldn't be broke!

1 box fettucine: $3.89
1 lb. brussels sprouts: $1.25
1/6 lb. pine nuts (roughly 5 tablespoons: $2.00 (based on $12 per pound)
1 pint of heavy cream: $2.49
i'm going to assume you have butter and salt and pepper at home
total: $9.63 for four servings, which is $2.40 each serving.

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