Mortgage confusion.

If you can balance your checkbook, you know more about money than I do, and if you have a stock portfolio, or even some kind of retirement package, you know more about investments than I do, and if you took even one course on the subject in college, you know more about economics than I do.

  • The basic argument here is one I made some time ago. It seems still to pertain, but as I noted, my estimation of such stuff is dodgy at best.

So. Someone out there should be able to clear up a serious bit of confusion for me. It’s this.

The mortgage crisis.

I can understand how it’s a crisis for the beleaguered home owner. S/he in theory owns a house, but because a bank (generic term for megalith money manipulator) holds title until a purchase loan is paid off, s/he actually is in a rent-to-own situation.

Fall behind in payments, and the bank will call in the loan. If the rent-to-owner cannot come up with the cash, the bank will repossess the house. I can… understand that bit, also.

I can even sort-of understand that the bank uses those mortgages — which is to say, the titles to those houses which, technically, it is letting out to rent-to-own residents — that the bank uses those mortgages as collateral for its own fiscal adventures with super-banks.

The mortgage crisis occurs, according to the government spokespeople and the media who transmit their statements, when large numbers of residents can no longer afford the monthly rent. The bank, they say, is saddled with “bad debt.” The value of the bank’s own collateral, therefore, has dwindled. The super-bank which has taken on those mortgages, in consequence, sees its assets dwindling. It calls in its loans, and if the bank cannot make the payment, the super-bank will repossess all those mortgages.

Are you still with me? I hope so. The footing is treacherous and the path is badly marked. Persevere. I think we’re nearing a place where we can stop and rest.

Here’s the key question. While I can see how this situation is a problem for the occupant of the house, who now has to move in with relatives and say good-bye to plans and investments and the expensive renovation of the kitchen, I cannot see how this is a problem for the bank or for the superbank.

Don’t they still own the house? Isn’t the house still there? It may have depreciated over the years, from neglect or from a declining market, but it remains a real piece of property, whose value is bound — on the average — to be greater than the amount of money the bank has provided to the former occupant at the close of the original sale.

One possibility — the only one, frankly, which I can envision at the moment — is that bank-type people do not accept that real property has value, not the way real money has value.

And here, perhaps, we get back into the “wealth is the only real generator of wealth” bullshit.

I don’t know, I really don’t know. Any aid gratefully accepted.


2 thoughts on “Mortgage confusion.

  1. I also am unskilled in matters of economics. Regarding whether held properties are real assets, I think the answer is yes. But they are not spendable. You cant rub them with your fingers and experience a frisson of excitement. Nor can the banker meet his payroll with them. Instead the properties will cost him money to maintain them. Poor babies. My father never said a bad word about others except for bankers. He hated them

  2. You’re right, of course. But your answer brings the problem to its next level: those incredibly rapacious and apparently insatiable money-jugglers not only want all our money, they want it right now. The bottom line isn’t ten years out, or five years out, or even six months out. It’s closing time today. They cannot be content to wait for their assets to re-acquire sufficient value in a seller’s market; they need the payoff right now.

    Yes, payrolls and upkeep are expensive. But they are among the basic costs of doing business, or they have been in most businesses most of the time. Look at current quarterly reports from the moneymongers. They’re through the roof. They don’t need their cash right away. They haven’t room in their own vaults to store what they have on hand this afternoon; they’ll have to ship it to (tax-indulgent) off-shore facilities.

    The ordinary costs of doing business are being shelved for the instant profit.

    I want to be obscenely wealthy, and I want it right now.

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