In a similar experiment, "Fast Money" trader Jon Najarian (of OptionMonster) just bought an MBS for $2,100—a tiny sliver of a bond valued at $4.4 million. (Watch Jon's explanation in the video).
Najarian made the purchase through SecondMarket, a firm that specializes in matching buyers with sellers of these illiquid securities.
"You want to buy a bond that has some security, meaning it has some cushion below it, that's high in the cap structure so you're going to more likely get a return on your principal and you want something that's performing fairly well," says Elton Wells, head of structured products at SecondMarket.
Najarian chose an A-1 bond full of underlying collateral in places hardest hit by the recession, including California, Michigan, Arizona, and Florida. In all, the bond contains mortgages from 13 states. 27 percent of those loans are delinquent more than 60 days; nearly 20 percent are in foreclosure.
CNBC will monitor the performance of the the loans in Najarian's MBS and will regularly report any new information.
The move comes just as the SEC is proposing new rules for the sale of asset-backed securities that would require greater transparency by issuers and provide better protection for investors. (Read more here).
Follow Jon Najarian at http://twitter.com/optionmonster
Trader disclosure: On Apr 7, 2010, the following stocks, commodities and or options were owned by Fast Money trader Jon Najarian; Jon Najarian Owns owns Call Spreads in (PALM), Jon Najarian Owns owns Call Spreads in (TXT), Jon Najarian Owns owns Call Spreads in (AAPL)