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How You Can Profit From the Mortgage Bust

The cat's out of the bag. Happy April Fool's!

You've probably heard all about America's housing crisis. Many of the stories we've seen are as fascinating in their economic implications as they are heartbreaking in their human dimension.

But precious few are talking about your best chance to profit from the crisis today: by purchasing mortgage-backed securities.

What the heck is a mortgage-backed security?
Mortgage-backed securities (MBSes) are a clever product of elegant mathematics and financial wizardry, but conceptually they're really quite simple. And right now they provide enormous profit potential for savvy investors.

Here's how they work:

After banks issue mortgages to home buyers, they sell those mortgages to other banks, Fannie Mae, and Freddie Mac. There, the mortgages are pooled together into bundles of mortgages called a mortgage-backed security, which are then shipped off to other banks and China.

Most of these mortgage-backed securities are considered safe, because they are backed by Fannie and Freddie (which are backed by the full faith and credit of the United States government.) The owner of a mortgage-backed security earns the mortgage payments from thousands of homeowners!

Why MBSes should matter to you
In November 2008, with the housing market going haywire and our economy on the brink, the Federal Reserve stepped in to give America a bailout. It gave housing prices and private investors a boost in large part by purchasing tons of mortgage-backed securities: $1.25 trillion, to be exact. That bold action was an important factor in stabilizing the housing market and the overall economy.

But that program expired yesterday, March 31. Many experts are concerned that because the housing market still depends so heavily on the Fed, ending the program poses an enormous risk to our embryonic housing recovery. Without a major buyer for MBSes, mortgage rates are likely to increase, foreclosures could rise, and our most vital financial institutions -- Citigroup, Bank of America, JPMorgan Chase, and Goldman Sachs -- could lose lots of money.

Fortunately for America, The Motley Fool is picking up where the Fed left off, by buying up $1 trillion worth of mortgage-backed securities. This is where you come in ... to join the Fool in profiting from this once-in-a-lifetime investment opportunity to cash in on these mortgage-backed securities.

How we'll save America while profiting from the crash
The Motley Fool has created a new firm, Long-Term Mortgage Management (LTMM), a fund led by Tom Gardner's hand-picked team of two Ph.D.s and a boy genius in addition to a staff of experienced quants. We're raising capital from enterprising investors like you who are ginned up to profit from the housing bust. By investing as little as $500, you might earn up to $10,000 or $50,000. Invest more, and your profits could rise accordingly.

LTMM will use our raised capital to purchase $1 trillion worth of MBSes and collect interest payments from homeowners all across the country. Those profits will be shared with you, our investors. But because of the riskless leverage involved and our low cost of financing, LTMM will earn substantially more interest than you could by investing on your own. Furthermore, you'll be able to sleep easy at night knowing that should a materially adverse unexpected incident occur, LTMM would almost certainly be bailed out by the Federal Reserve, as it would by then be way, way too big to fail.

If you'd like to discover more about how this investment strategy will succeed, we highly recommend you read our 20 Frequently Asked Questions About Long-Term Mortgage Management or email us your questions and comments.

How you can profit, too
Because of high demand and limited space, if you're interested in joining The Motley Fool as we profit from the housing crisis, it's important that you reserve your spot in the fund immediately.

Here's how:

  • Call our broker now to ask how you can participate in The Motley Fool's Long-Term Mortgage Management fund. Our brokers are ready to take your questions and orders at 703-254-1445. This is a chance to be on the right side of history, with us, by putting $100 to $500 or a lot more to work for a shot at spiraling wealth.
  • Visit our website to learn more about Long-Term Mortgage Management and to meet our team of experienced professionals.
  • Let us know what you think. If you have any questions or comments about Long-Term Mortgage Management, simply email us at

Read/Post Comments (3) | Recommend This Article (65)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 02, 2010, at 12:35 AM, pacificsales wrote:

    I spent 30 minutes reading this and all the links. I worked for a bank for 14 years and was trying to understand your Lehman example. My initial thought was I needed to cancel my subscription because you guys were way out there. Then greed took over and I made a mental note to call the listed phone number tomorrow and send off $500 for the heck of it. After 5 minutes away from the computer, I realized this has got to be a April 1 joke. Now if I can just understand why you would recommend a boring old US steel company.

  • Report this Comment On April 02, 2010, at 12:47 AM, LikeToInvest107 wrote:

    Ditto. Same exact experience sequence & all.

  • Report this Comment On April 02, 2010, at 10:09 AM, churitos wrote:

    Isn't it the same as investing in FRE and FNM?

    Maybe is safer to invest in official goverment institutions like those, rather than these mortage strange type of who knows what they really are?

    You said they are safe and we can sleep at night, is that really so? I wish. I haven´t sleep good at night since I lost so much money in the stock market, because of the mortage crisis.

    What do you think of investing in FRE and FNM? I already did it, but surely I'll have to wait for years to get some profits.

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