Some clarifications to the previous post...

I just realized that some terms in that post might not be understood by the 'cool' guys who are not finance nerds...so i have attempted to explain some of the terms here -

1. mortgage - Americans call a home loan a mortgage. The monthly payment on the home loan is generally called a mortgage payment.

2. Mortgage Lender - The financial institution that gives you the loan. Unlike in India, where most lenders are also banks like ICICI, here you have specialized lenders like Countrywide.

3. Sub-prime Mortgage - Generally mortgages are defined by the interest rate that is charged on the original loan. A Prime rate is the standard bank rate, and denotes a borrower of moderate risk or low risk. A sub-prime mortgage is where the interest rate is higher than the prime rate, to account for the increased risk of some borrowers (people like the guy i explained below, or like me...;-) )

4. mortgage securities - a fantastic invention by a Salomon Brothers guy by means of which the mortgage lender can essentially take the loans that it gives out, put all of them in a big pool, and sell it as bonds to suckers like pension funds and hedge funds. Essentially, the bond payment is the mortgage payment (or the EMI, as they call it in India)

5. Credit Rating Agency - Agencies like Moody's, Standard and Poor's and Fitch. These guys analyze companies, governments and other organizations and rate their bonds ranging from 'investment grade' meaning really, really good organizations with no chance of default (yeah, right...); to 'junk' meaning you might as well buy the lottery (or General Motors stocks)