After obtaining a $5 million loan from Citi, the real estate company went to buy a building and build an apartment on its own and expanded the company's scale.

The Citi Investment Department, in accordance with Li Changheng's instructions, combined a high-quality mortgage contract with a good credit rating and a subprime loan contract with a low credit rating at a ratio of 3 to 7.

A packaged investment portfolio was given to the appraisal agency for profit evaluation.

Simply put, subprime mortgage loans are subprime mortgage loans.

This ‘time’ means a mortgage loan with low credit and low debt repayment ability.

The new combination contract has a loan of US$5 million, accounting for 30% of the total, and the risk of repaying interest is extremely small, and there is also a stable interest income.

As long as Citigroup is willing to sell this contract, there are funds and financial companies on the market. From Citigroup's normal loan interest of 8% to 10%, Citigroup will first eat about 1% to 3% of the profits and then take over the contract.

Citi took back a loan of US$5 million from the financial market in a short time, received another 3% interest, and then continued to lend it to other customers.

Financial institutions that buy this high-quality contract will not worry about losing money because they have a mortgage, and they will get a 5% to 7% interest income.

The only thing that needs to be paid is that it will take a little longer to collect money.

But for many funds, the span they wish to make profits is calculated over the years.

The reason is very simple. Most pension and insurance funds do not attract customers with high returns. Instead, they focus on long-term returns, because many older people prefer stable investments.

Therefore, high-quality loan contracts are extremely popular in the market.

And sought-after goods also mean it is difficult to buy, and even banks themselves are unwilling to sell such contracts.

In this way, fund managers who need to rely on stable returns to maintain fund operations have to consider eating a risky mortgage combination contract consisting of a portion of fat meat and a portion of blind boxes.

Of course, fund managers are not stupid, but are extremely shrewd.

If Li Changheng wants Wall Street to take over the new combination mortgage contract, he needs a credit rating agency to decorate the contract with his own credit and influence.

For consortiums like Citi, credit rating agencies are the easiest to handle among some links.

Although they are still the world's four major rating agencies at this time and look very high-end, they are actually no different from big lawyers and big media.

If you want to live better and get more rating lists, you will always make some compromises due to interests and pressure.

Not to mention that the combination contract given to the rating agency this time is quite good in terms of benefits and risks.

But when they have rated more often and want to give up, they will not only face the risk of a decrease in profits, but also the risk of managers being kicked out of the company.

The rating agencies ranked first and second might just wait for them to give up and take over.

Because everything on Wall Street is in line with interests, and it is not illegal to make a rating error.

If you look carefully at the evaluations given by these rating agencies, most of the 3a contracts use the word "suggestion".

In this way, it is normal to make mistakes.

Moreover, if the overall trend of housing prices is rising, all troubles will be covered up by countless speculators and huge transaction volume.

Before the subprime mortgage crisis really breaks out in the future, if it weren't for the US housing prices to be in a downward trend for several years.

Even if a crisis breaks out, its destructive power will not be that strong.

After completing the rating agency, it is equivalent to a mortgage combination contract. Before entering the market, it has undergone a delicious packaging that looks very delicious.

But if you really think that a contract can sell well, you're a big mistake.

Even if the contract after the rating is at the 3a level, it is OK to deceive rookies in the market, but it will definitely not escape the eyes of those old foxes on Wall Street.

Therefore, someone needs to guarantee this combination mortgage contract, and it is a guarantee of US dollars with real money.

This time, Li Changheng did not send it directly to the insurance company under Citi's name to guarantee the contract, but to Fannie Mai for review.

As for the reason, the first is that this contract is indeed not a scam, and its profitability is not much different from most contracts on the market.

Li Changheng believes that the contract is sent to Fannie Mai. After Fannie Mai reviews it himself and evaluates it, he is very likely to take the contract by himself.

The worst thing is that you will definitely take the insurance premium satisfactory and then actively recommend it to the market.

Since 1938, Fannie Mae has been the largest government-sponsored company in the United States and an insurance company in mortgage guarantee.

The purpose is only to expand the flow rate of funds in the secondary housing consumption market. To put it simply, it is to make banks more willing to lend to people in need of buying a house.

But the bank is not stupid. If the money you borrowed is not collected in the form of cash, it would be a loss even if you take Gu Fangzi and the collateral.

Therefore, in order to stimulate the US housing market and to make more profits, Fannie Mae's mortgage contracts sent to the bank, as long as the profitability is good and there are no violations, the final insurance review is generally not strict.

Moreover, Fannie Mae is holding the right to purchase mortgages without the Federal Residential Administration guaranteed.

This means that Fannie Mae can not only be an insurance company, but also enter the financial market independently to earn profits.

The mortgage portfolio contract sent by Citi has a profit of between 6% and 7% calculated by professionals. With the rating certificate of rating agencies, the contract was bought by Fannie Mai itself before it had time to enter the market.

Then Fannie Mae swallowed about 2% of its profits and turned around and actively pushed the new contract to Wall Street.

After Fannie Mai made this move, because major financial institutions in the market have insurance, someone soon took over this financial product consisting of 5 million and 30% of the high-quality contract and 16.67 million subprime mortgage contracts.

Citigroup recovered a loan of US$21.67 million, received 3% interest many years in advance, and transferred the risk.

And he also got Fannie Mae to guarantee himself. If something really happens in the future, he will be a qualified scapegoat.

Three days later, after reading the report given to him by his confidant subordinates, his breathing became a little heavy.

What every bank is most reluctant to see and worry about is loan default.

Not being able to recover money is equivalent to losing money. Not only will the interests of banks and shareholders be damaged, but the interests of management will also be greatly affected.

Now, just combining it can transfer some shit-like loans and default risks to Wall Street and various investment institutions.

Wall Street will transfer these risks to investors, even financial institutions and banks in island countries and Europe.
Chapter completed!