No one. I am debt free. When I paid my last debt off I vowed no more. Getting a house will take building it myself and I plan to. Already bought the land with cash. I feel real good about that.
I blame the banks for a lot of what's wrong with society today and refuse to pay them interest. A personal boycott if you will.
They are unethical and break the law with impunity. Extracting free will from the populace. It's wrong. The whole system is a lie.
Good for you. For many Americans who were born into families living in high growth areas (California, New York, etc.) a mortgage is often times the only way to stay in the area close to family, while scraping together some semblance of financial stability.
I'm curious as to why you think the "whole system is a lie". This sort of blanket statement seems to discount the fact that banks do in fact serve a purpose in our society, specifically by providing liquitity.
Banks used to serve as simple intermediaries that provided cash for the economic system to continue to function. Starting around the turn of the 20th century, during the rise of the robber barrons, a pattern of increasing consolidation created financial capital that became central to the system and so powerful that the planners inside of the banks can essentially control the economy by deciding or not deciding whether to fund a project or to fund a competing version.
The only way to get away from the banks is to have government funding or independent wealth. Independent wealth of sufficient magnitude will nearly inevitably be socially tied to banking circles as is government. We all know how the revolving door works in government.
Of course, it's not a secret what their aims are: squeeze as much money and power out of the economy as possible and arrange the world economic system to continue that process. It doesn't matter what figures actually head the banks, the system drives them to take the same actions. However, they do tend to be white dudes from the west with their thumb on the global south.
This is not a new pattern, and definitely existed before bank consolidation. Rich, powerful families dictated for centuries who and what to fund and controlled the economy of their fiefdom.
You're right of course, but I think after the monarchies were overthrown, people thought that OKAY now we can have a more equal economy with lots of small independent producers competing with each other. Consolidation showed that this story is (at least now) completely untrue.
In software, we can generally agree that too many layers of abstraction introduces many issues since it is difficult to ensure each layer is perfect. For this imperfection we often pay a price: performance, maintainability, etc. However I think that often this imperfection is unintended and is a consequence of trying to make things better.
In the finance world, and particularly with mortgages, there are similarly many layers of abstraction but each layer has an imperfection built in: money.
Your mortgage, after its gone through all these layers and after everyone had extracted their pound of flesh from its value along the way ends up looking nothing like the original product. It might end up as a resecuritized security based on only the interest portion of a pool of loans or some other abomination. Just like a JavaScript application is a completely different beast from the the x86 asm executing on your CPU.
However, in software these layers exist to try to make things better. In the finance world these layers exist to only make money. To extract value from one place and move it to another. These layers don’t need to exist in this form but they do because they make people money. This is the lie.
Despite this, we can’t just remove all these layers at once but maybe we can remove one layer. Just like you wouldn’t rewrite your nodejs server in asm but might drop down to Go or something.
Alternatively you can say, “hey I don’t need this website so badly so I’m just going to not build it” and not play. Or maybe you have the time and inclination to build it “from scratch” from assembly.
Starting with a plot of land and only the money in your pocket reminds me of the true hacker spirit! :)
This brought all my thoughts on the absurdity of the debt system out in a clear and understandable light. Thank you for expressing what I could not put into words. I wish I had sockpuppets to upvote you extra.
It almost made me cry to read that. You get it. You exactly get it. Thank you for writing that because it helps to keep me motivated. It's really hard.
Layers exist in finance for the same reason layers exist in programming: because value is being provided. Or, at least, that’s what the Efficient Market Hypothesis would say. Maybe you can’t see the value as an outsider, but you know, Chesterton’s Fence. Only when you see the value of the current system should you be allowed to change it.
Using the example of mortgage backed securities, they were created to solve real problems. Mortgages carried risk, were too unique. Also money had a hard time reaching those who needed mortgages. Most mortgage providers were local and often there were too many people who wanted mortgages and not enough money, or the other way around. By packaging mortgages together, you could reduce risk and sell traunches nationwide.
TLDR: understanding is a prerequisite of change. And just like software, if you can’t find a reason for why something exists you should probably look harder. More likely than not, you are the one who doesn’t understand, not the person who created the thing in the first place.
I traded CMO derivatives for several years at a broker dealer that specialized in MBS and other fixed income products. I’m intimately familiar with the system and stand by my analogy.
I work as a derivative quant/trader in EM (mostly fx swaps and such) and think that the broker-dealers I transact with provide value. Otherwise, obviously, I wouldn’t need them! This may be a little controversial, but in most cases, being paid means you provide value. And when this isn’t true, it almost always has to do with government regulation.
Anyways, while I don’t have any experience with MBSs, you were probably providing value even if you didn’t think so.
It's not even banks as we know it, it's trusts that hold bundles of mortgage loans and are insulated from the mortgagors whose loans are serviced by entities with incentives that aren't aligned with either the trust investors or the mortgagor.
In the 08 meltdown we saw fee-based servicers incentivized to hang onto badly performing mortgages and the fees the servicing thereof generated rather than enter into workouts that 40 years ago the S&L down the street would have rushed into. The experience taught us nothing other than homeowners make great runway foam.
I value my privacy. Throwaway is my way to indicate my lack of desire for any personal gain and also repercussion from what I say. I have no reputation to protect or desire to increase credibility or other gain.
The implication is that the banks are breaking up families because they can't afford to live close to each other any more.
Think about that. They are profiting by coming between a human being and their basic human needs.
They've pushed up the cost to acquire those basic human needs by 7x in the past 80 years.
I think it's breaking our society. The lie is they are enabling people to afford a home, when in fact it is because of them that the younger generations may never be able to afford one at all.
> In 1970 about 1 year of earnings could buy a house. Today it takes 4 years salary.
That 1970 ratio seems wildly low compared to the data I found. Historical ratios seem to be 3-4x, with periods in the 1950s, mid-2000s, and perhaps soon [but not yet] of 4.5-5x. Housing seems slightly (~5%) cheaper now than in the 1950s and about 30% more expensive than the 1970s based on this ratio calculation.
House purchase prices were lower in 1970 in part because mortgage rates (and therefore housing monthly payments per $100K borrowed) were dramatically higher.
That doesn't mesh with housing prices increasing while salaries have remained flat. The 7x increase in price I mentioned above was inflation adjusted, so your 2.6% cagr was above inflation.
Median salary seems a strange figure to use instead of, say, median household income. Way more two-earner households in 2019 than 1970, and at least some fraction of that extra income is being used to bid up home prices.
Because a household must have two incomes now to afford a home. This comes at the expense of what is best for the family, especially the children. I think you're agreeing. Home prices are out of control.
I think you have that backwards: Women choose to enter the workforce in much higher numbers than 50 years ago at least partially because it's much more rewarding than the equivalent time spent in domestic labor. The result is higher earning households and thus higher demand for the less elastic supply of housing in some markets.
It's also almost certainly the case that dramatically lowered costs in other areas (food, telecommunications, household appliances) has freed up spending power which, again, has bid up prices in desirable markets.
Cheaper credit has greatly magnified the same effect, without necessarily driving up true costs.
As you've pointed out, housing isn't particularly expensive everywhere, just places where they're not building to keep up with rising demand.
Oh, and we haven't even mentioned that comparing the median home in 1970 to the median home in 2019 is not exactly apples-to-apples, starting with square footage.
I believe, as did my single mother, that women going to work hurt families also. She said before she died, women "shot themselves in the foot and made it much harder on single incomes to support a family. Women always had a choice to work. Now they don't."
Maybe you have something wrong. Maybe it wasn't more rewarding to go to work. People on their death beds don't say I wish I'd gone to work more. No. They say they wish they'd spent more time with family.
I'm in a similar position, but don't avoid banks altogether. No debt, except a credit card balance which is paid off each month, and I only use that for the extra protection over a debit card.
For a short time after college I was in a bad spot with a low paying job and lots (relative to my income) of debt. In a way, I was fortunate to see what that's like early, with a relatively small amount of money (my CC limit was <$2000, but always maxed out because I was broke).
Where are you/how old/how much money did you save up to do that?
I’ve been working only about 4 years and don’t have that kind of capital saved yet, want to set realistic goals and see if and when that’d be possible for me.
I bought land for $60,000. I plan to spend $100,000 on materials, utilities, fees etc and construct it myself. I want to start a revolution and want to enable people to escape the system for what is a typical down payment in most large cities today.
I was facing that choice myself: build or buy. I can do either with what I have and after much consideration, the only moral choice I can accept for myself is to build.
I feel very fortunate that I have that choice. I know others don't and so now my life mission is to bring that choice to more people and in doing so fight what I believe is causing harm to our society: the banks.
I'm not familiar with any rules like that from the city but my neighborhood rules say I have 8 months to complete building the exterior portion of the house.
There's a lot of land for sale outside cities as well with few and sometimes no restrictions even beyond time limits.
Community covenants can be quite restrictive in some areas yes.
how deep is this conviction? does your employer have debt? do you collect interest, either on savings accounts, bonds, or investing in companies that do?
I see your point and acknowledge the depths of the rabbit hole. The banks have dug in deep. It's hard, but I'm trying to dig my way out. Debt free is just the beginning.
> I blame the banks for a lot of what's wrong with society today and refuse to pay them interest.
That's a great observation. It's no wonder interest is prohibited in Judaism, Christianity, and Islam. The effects it has on causing and expanding the wealth gap are very obvious today. Not to mention it is a purely exploitative and parasitic practice.
Yes. That's right. It's having a noticeably toxic effect on society. Unfortunately the banks lobby effectively against the best interest of the public. I liked Obama, but the banks owned him. Goldman Sachs had people all in his cabinet.
Why would you want to be debt free? You often can make more money by having debt than paying in cash. Fixed rate 30 year mortgages are at ~3.7% right. Go buy some corporate bonds or stocks and you will easily net more than ~3.7%.
Another great strategy is to get as many credit cards as you can and create a credit ladder than defers payment (and interest) as long as possible. If you manage to get 12 credit cards and your interest free period is a month, you can literally defer payment for anything for year, netting you that sweet sweet interest (T-notes if you're risk adverse, or equities if want some better returns).
But if you think it's "wrong", well you do you I guess.
I am debt free. Paid cash for my house. Don't own a credit card. I think technically my wife has one.
There are a lot of ways I could make more money. I have enough money as it is, so what's the point? The rest of my money is in stocks, etc. I make enough of a return on it.
Basically, being debt-free gives me peace of mind that is worth whatever marginal return I may be getting otherwise.
With mortgage, that’s not unreasonable. After all, you will always be bearing some risk as your APR will never be below the risk-free rate. But for credit cards, if you just store the money in the risk-free rate (3 month T-notes), you will be strictly making more money without bearing any extra risk. In affect, it’s a free lunch: it is strictly superior. You could probably even program such a system and never have to think about it. Here’s an example using 1 credit card that charges interest after a month:
1. Initially, buy 3 month T-notes equal to your max credit limit.
2. At the end of the month, transfer the dollar amount of your current credit balance and pay off your card.
3. Top off your T-bills to maintain the max credit limit amount.
4. Profit!
You just scammed the credit card companies out of a month of interest! The strategy looks even better with cash back or airline miles or points or whatever.
As with all things in economics, it’s not a free lunch. The cost of credit has already been priced into everything you buy. In this case, you can choose to make a small amount of money in exchange for some headache of making sure payments go on time, or leave it alone. If everyone eventually takes 2% rewards, instead of using debit cards and plain cards, the cost of credit in your purchases will rise from about 1.8% to 2.8%.
I already view the 1.8% or whatever I'm making on my emergency funds as basically inconsequential, so a percent or so on several thousand dollars doesn't really pique my interest enough to go to the bother.
As I heard somewhere or another: "Get the dollars right and the pennies will take care of themselves"
In case anyone is interested, the "war1025 guide to wealth accumulation":
1. Decide a reasonable checking account balance based on your pay frequency and expenses. (I get paid weekly, so I've found that $2,000 is a good number for me.)
2. Every week when you get paid, transfer any amount in excess of amount (1) into index funds.
3. The index funds are not to be added to and never withdrawn from. (I made an exception to this rule to buy our house)
(Obviously have the correct emergency funds to handle unexpected events. Also you may at times choose to instead transfer the money into savings to work towards some known upcoming expense.)
Fair enough. But let me tell you a story: one of childhood friends was very well off and had a bunch of MTG cards. His decks were always very good (for a 11 year old). One time a new kid at the school came over to his house with us. The kid said: can I have some magic cards, you have so many? And my friend said: I didn’t get so many by giving them away.
Anyways, maybe not that profound, but the memory has stuck. By sweating the cents, you get the dollars. And there’s another saying that is different from yours that I heard my dad say constantly: every penny counts.
Every dollar does count, but being reckless with dollar bills is going to get you in a lot less trouble than being reckless with twenties.
For what it's worth, we have a family of five, my wife stays home, and I believe we currently save somewhere in the ballpark of 35% of our income. I think that counts as being pretty frugal compared to most of the people I know.
I agree with war1025 the overhead of managing the churn isn't worth it. Better to invest the time and brainwaves into a SaaS business or designing and building a home.
I once thought it would be funny to offer a service that bought "bundles" of securitized mortgages, but would then separate them out and offer to sell specific mortgages to people's arch enemies who would presumably pay a premium.
That's not correct. The collateral is usually shared among all tranches. You could have MBS deals w/ tranches backed by separate collateral pools but these are defined at origination. It's not that different tranches are backed by different subsets of the collateral. The cash received from all mortgages is pooled and then prioritized based on tranche seniority and other rules specific to the securitization.
You don't need to buy securitized mortgages. You can buy the mortgages directly. They're called whole loans. Sourcing them might be a bit tricky and I think you have to be accredited investor. They're usually sold in blocks among banks and institutional investors. I doubt you'll be able to source one specific person's loans and when these loans are up for sale, they usually don't include personally identifiable information.
The market for non-performing mortgages is more ad-hoc and you can buy an individual mortgage. But finding who owns the loan of a particular person is difficult. Also you would have to go through the trouble of foreclosing on them.
It shouldn't be too hard to find who owns a mortgage. A mortgage must be recorded timely to be properly enforceable, so most are. Just have to know what to look for at the county records office (I assume you know where your nemesis lives)
I'd find it hilarious if my arch enemy [1] bought my mortgage, especially if they paid a premium to get it.
When someone buys your mortgage it doesn't change the terms of the mortgage. For the most part all that changes is who you send your payments to.
Probably the worst that they could do is (1) make you use a payment method that is inconvenient for you, such as mailing an actual check once a month, and (2) if you violate any terms of the contract be hard nosed about it.
[1] I'm actually between arch enemies at the moment, so the position is open if anyone would like to apply.
> make you use a payment method that is inconvenient for you, such as mailing an actual check once a month,
This is really the biggest challenge facing borrowers. The means of payment should really be locked in. Fortunately the servicer doesn’t always change too, but that is something that the law should probably protect.
I could imagine the law requiring the consent of the borrower to the transfer of servicer, or some similar mechanism.
>>> This is really the biggest challenge facing borrowers. The means of payment should really be locked in.
Why? Some debt terms are incredibly long, such as a 20/30 year mortgage. Many soon to be paid off mortgages were signed before online banking / online payments was a thing. So you would be forcing people to continue using outdated and inefficient technology,,, b/c no reason at all.
Can you imagine the payment technology we will have 20 years from now? If I bought a house with a mortgage today, why should I be forced to continue using today's technology for another 20 or 30 years when a better technology is out there?
Okay, yes, locking in the payment method at the start is bad, but what if it can't be changed without the consent of both parties? Presumably if some awesome new payment system becomes available, both parties would consent to use that.
Can this be expanded to selling “nursing home futures”? In a typical home, families pay X/month to keep their loved ones taken care of. In my plan, investors can buy shares in each resident, and can expect an increasing return as the upfront costs of establishing the resident are amortized.
The nursing home turns a profit if a resident dies within a period of time where the “upfront costs” are not yet all spent. The investors profit if a resident stays alive for a long period of time in the home.
The perversion of incentives will encourage good care of the residents that maxes out their life span and to ensure that investors keep coming back.
I wonder if someone with a finance background could tease out the benefits and pitfalls of this plan.
How do people upvoting this imagine this would work? There are essentially two things you could buy, and they’re available independently: servicing rights (“You are responsible for talking to the homeowner and receiving checks then sending them upstream”) and the economics of the mortgage.
If you beneficially own the economics... well, great, your arch enemy is theoretically paying you money, but you have no options to screw with them. You own an extremely regulated specialty financial product. This is similar to the misconception that stock in Google entitles you to just walk in and take a computer in exchange.
If you buy the servicing rights, you have much more surface area to be an incompetent servicer, but again extremely regulated and you’re pricing yourself to being sued by the homeowner, the GSEs et al who set up the securitization program and zealously defend it, and potentially even the entity owning the economics.
Being the servicer allows for all sorts of griefing that falls completely within regulation guidelines.
My service has done dumb things, all presumable by accident, like: deposit my check into a different account, charge me a late fee and not refund; change my escrow amount 4 times in a year; not take electronic payments.
It’s annoyed me just due to stupidity. If my arch enemy owned my loan they could do stuff like change payment addresses; “lose” payments; late pay taxes and insurance.
I thought about starting a non-profit which buys old debt, contacts the original borrowers and negotiates payback at the newly purchased rate. Then uses the new payments to buy more old debt.
This has the opposite effect that you think it will have. A person with many, many enemies would have many prospective buyers which would drive down their expected borrowing costs, which then materially benefits them. It's the same reason why the cost of capital of companies disfavored by ESG mutual funds is higher (and they are thus punished) -- fewer people are willing to buy their stock.
> The average price, according to a 2013 Federal Trade Commission (FTC) report, is about 4 cents per dollar, which means a $200 credit card balance goes for $8 on the secondary market.
Wow, that is cheap. Is there a way to buy your own debt?
People only usually sell bad debt. If the debt isn’t bad and is making you money why would you sell it? The only reason may be to release capital. So if you’re a bad debtor or your creditor is in trouble then yes your debt may be worth this little, and in which case you may already be able to call your creditor and offer to settle now at a discount.
If you’re a normal professional with a standing credit card debt that you pay off every month? Then no this debt is likely not for sale at a discount.
People buy and sell bonds and debt all the time for the same reason they buy and sell stocks or anything else. So they can put the money to work in some other place with a higher expected return.
To make this work you would need a lender willing to lend four cents on the dollar to someone that has defaulted on a lot of debt for awhile (typically not someone that can obtain credit easily) There may be an opportunity for a non-profit or micro-lender here though.
My dad tried to buy the mortgage on our family home from the local bank. It was at a time of rapidly rising interest rates, and according to the textbook calculation, our mortgage was costing the bank to hang onto. He figured out the fair market value of the mortgage, and offered to split the difference with the bank. Each side would profit.
The banker's first reaction was: This can't be real. A week later, the banker called my dad back and said: Sure enough, the numbers say that we should sell you your mortgage. But we also found out that it's illegal.
I don't know the details of why it might have been illegal, but it was an amusing episode.
Which isn't normally a crime. The lender is allowed to forgive part of a loan if they want to. The borrower would owe taxes on the difference. Normally this comes up with people who aren't paying at all, where the lender (or owner of the mortgage) is happy to salvage any money from the loan, even if less then the face value.
In response to both the posts here, I don't know. It also could be that the banker was full of it. On the other hand, I could imagine a sort of moral hazard situation where someone could take out a loan, let it go into default, and then offer to buy it back at a massive discount.
There are some difficulties in there such as the individual who got the loan written off, may have to pay income taxes on a part of the loan. It's still nice of course, but it's certainly not straightforward.
A thing you can do, quite successfully, is say “I will offer you $20, in full satisfaction of this $200 debt and anything you are tacking onto that. Give me that in writing and you’ll get a check via courier.”
(I long ago had a hobby of getting people out of consumer credit situations by writing letters, and this is one genre of the letter. Note that it won’t always work; the firm can’t make a practice of selling debt at basis, obviously, but something beats nothing and you can often convince them that those are their two options.)
It is very, very important that if one does this one gets the deal in writing, otherwise it has a bad tendency to a) be treated as a payment rather than a pay-off and b) guarantees they and other creditors will call you harder because you’ve signaled that you are in the N% of accounts willing to pay.
> I long ago had a hobby of getting people out of consumer credit situations by writing letters...
Whilst you're here, I must thank you for the wonderful advice in your article on that subject, which was posted in this place some years ago. If I were to distil it down to a single phrase I think it would be "present as if you're collecting a paper trail".
This was hugely helpful in helping me help my wife dispense with an egregious parking charge last year, and I feel it has put me in good stead to handle similar matters in the future.
Student loan debt is still not removable through bankruptcy, even if you transfer it to some other form of credit.
Also, transferring loans around with the intent to declare bankruptcy is fraud, and while you may skate on that initially you won't when you're in court.
In a court? If you borrowed from Peter to pay Paul, knowing that Peter’s debt is discharged in bankruptcy and then you declare bankruptcy? I have a feeling a not too impressed bankruptcy judge will be entering a sizable judgement against you.
The issue is that you took out a load with the intent of declaring bankruptcy. You would be in just as much trouble even if you didn't use the money to pay back non dischargeable debt.
You are unlikely to get a high enough credit to cover student loan debt if it is high. Else everyone would be doing it. Personal loans and HELOCs are even cheaper and hard to get with bad credit.
> You are unlikely to get a high enough credit to cover student loan debt if it is high. Else everyone would be doing it.
Well, no, because bankruptcy isn't an option most people want to pursue, and personal unsecured credit is far more expensive than student loans with the same principal unless you discharge them in bankruptcy.
Most loans don’t allow payment via credit card, and credit card companies can file to have debt excluded from bankruptcy if they can show you incurred it with no intent to pay.
This would be an example of fraudulent conveyance if done purposefully.
On top of that its going to be extremely difficult to get tens of thousands of dollars in unsecured credit, especially if you're in a position to declare bankruptcy.
> What would happen if you transferred your student debt to a credit card and then declared bankruptcy?
If you did it knowing you were insolvent and planning to file bankruptcy, it would be illegal, and that would be taken into account in your bankruptcy (it might effect the dischargeability of the credit card debt or have other adverse consequences.)
Of course, credit cards try to keep up with your credit circumstances and adjust your credit lines appropriately, to guard against that general class of scenarios.
If you did it routinely while in good financial shape but later declared bankruptcy with the balance still on your credit card accounts, it would be discharged like any other credit card debt.
The entire industry of debt collection is literally scum. Debt can be sold to these parasites at any point in a transaction with a company.
During my college days, an apartment complex tried to add on various move out fees when I didn’t renew. Despite being in active dispute with the complex about the fees, the complex ended up sending the fees to a debt collector.
Fortunately I was able to reduce the amount to an agreeable state and it never reported to the CRA. Still have clean reports to date.
The industry buys debts with little to no proof that the debt is legitimate and then proceeds to hound and scare people who don't know their rights into paying.
I have a pretty unique last name, and am completely oblivious to bills. Accidentally stopped paying a credit card after an emergency and the law firm that sued me employed a cousin I still haven’t met. Still laughing after paying that one off
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[ 3.3 ms ] story [ 167 ms ] threadI blame the banks for a lot of what's wrong with society today and refuse to pay them interest. A personal boycott if you will.
They are unethical and break the law with impunity. Extracting free will from the populace. It's wrong. The whole system is a lie.
I'm curious as to why you think the "whole system is a lie". This sort of blanket statement seems to discount the fact that banks do in fact serve a purpose in our society, specifically by providing liquitity.
The only way to get away from the banks is to have government funding or independent wealth. Independent wealth of sufficient magnitude will nearly inevitably be socially tied to banking circles as is government. We all know how the revolving door works in government.
Of course, it's not a secret what their aims are: squeeze as much money and power out of the economy as possible and arrange the world economic system to continue that process. It doesn't matter what figures actually head the banks, the system drives them to take the same actions. However, they do tend to be white dudes from the west with their thumb on the global south.
In the finance world, and particularly with mortgages, there are similarly many layers of abstraction but each layer has an imperfection built in: money.
Your mortgage, after its gone through all these layers and after everyone had extracted their pound of flesh from its value along the way ends up looking nothing like the original product. It might end up as a resecuritized security based on only the interest portion of a pool of loans or some other abomination. Just like a JavaScript application is a completely different beast from the the x86 asm executing on your CPU.
However, in software these layers exist to try to make things better. In the finance world these layers exist to only make money. To extract value from one place and move it to another. These layers don’t need to exist in this form but they do because they make people money. This is the lie.
Despite this, we can’t just remove all these layers at once but maybe we can remove one layer. Just like you wouldn’t rewrite your nodejs server in asm but might drop down to Go or something.
Alternatively you can say, “hey I don’t need this website so badly so I’m just going to not build it” and not play. Or maybe you have the time and inclination to build it “from scratch” from assembly.
Starting with a plot of land and only the money in your pocket reminds me of the true hacker spirit! :)
Using the example of mortgage backed securities, they were created to solve real problems. Mortgages carried risk, were too unique. Also money had a hard time reaching those who needed mortgages. Most mortgage providers were local and often there were too many people who wanted mortgages and not enough money, or the other way around. By packaging mortgages together, you could reduce risk and sell traunches nationwide.
TLDR: understanding is a prerequisite of change. And just like software, if you can’t find a reason for why something exists you should probably look harder. More likely than not, you are the one who doesn’t understand, not the person who created the thing in the first place.
Anyways, while I don’t have any experience with MBSs, you were probably providing value even if you didn’t think so.
It's broke. I know that. I don't think continuing down a broken path is gonna fix it.
In the 08 meltdown we saw fee-based servicers incentivized to hang onto badly performing mortgages and the fees the servicing thereof generated rather than enter into workouts that 40 years ago the S&L down the street would have rushed into. The experience taught us nothing other than homeowners make great runway foam.
I just say what I believe.
Think about that. They are profiting by coming between a human being and their basic human needs.
They've pushed up the cost to acquire those basic human needs by 7x in the past 80 years.
I think it's breaking our society. The lie is they are enabling people to afford a home, when in fact it is because of them that the younger generations may never be able to afford one at all.
That's ~2.6% per year inflation, hardly the stuff of crippling hyper-inflation.
In 1970 about 1 year of earnings could buy a house. Today it takes 4 years salary.
That 1970 ratio seems wildly low compared to the data I found. Historical ratios seem to be 3-4x, with periods in the 1950s, mid-2000s, and perhaps soon [but not yet] of 4.5-5x. Housing seems slightly (~5%) cheaper now than in the 1950s and about 30% more expensive than the 1970s based on this ratio calculation.
https://www.longtermtrends.net/home-price-median-annual-inco...
House purchase prices were lower in 1970 in part because mortgage rates (and therefore housing monthly payments per $100K borrowed) were dramatically higher.
https://www.cnbc.com/2017/06/23/how-much-housing-prices-have...
I shared it because it didn’t mesh with what you were saying.
It's also almost certainly the case that dramatically lowered costs in other areas (food, telecommunications, household appliances) has freed up spending power which, again, has bid up prices in desirable markets.
Cheaper credit has greatly magnified the same effect, without necessarily driving up true costs.
As you've pointed out, housing isn't particularly expensive everywhere, just places where they're not building to keep up with rising demand.
Oh, and we haven't even mentioned that comparing the median home in 1970 to the median home in 2019 is not exactly apples-to-apples, starting with square footage.
Maybe you have something wrong. Maybe it wasn't more rewarding to go to work. People on their death beds don't say I wish I'd gone to work more. No. They say they wish they'd spent more time with family.
For a short time after college I was in a bad spot with a low paying job and lots (relative to my income) of debt. In a way, I was fortunate to see what that's like early, with a relatively small amount of money (my CC limit was <$2000, but always maxed out because I was broke).
Not a situation I want to be in again.
I’ve been working only about 4 years and don’t have that kind of capital saved yet, want to set realistic goals and see if and when that’d be possible for me.
I was facing that choice myself: build or buy. I can do either with what I have and after much consideration, the only moral choice I can accept for myself is to build.
I feel very fortunate that I have that choice. I know others don't and so now my life mission is to bring that choice to more people and in doing so fight what I believe is causing harm to our society: the banks.
There's a lot of land for sale outside cities as well with few and sometimes no restrictions even beyond time limits.
Community covenants can be quite restrictive in some areas yes.
That's a great observation. It's no wonder interest is prohibited in Judaism, Christianity, and Islam. The effects it has on causing and expanding the wealth gap are very obvious today. Not to mention it is a purely exploitative and parasitic practice.
Another great strategy is to get as many credit cards as you can and create a credit ladder than defers payment (and interest) as long as possible. If you manage to get 12 credit cards and your interest free period is a month, you can literally defer payment for anything for year, netting you that sweet sweet interest (T-notes if you're risk adverse, or equities if want some better returns).
But if you think it's "wrong", well you do you I guess.
There are a lot of ways I could make more money. I have enough money as it is, so what's the point? The rest of my money is in stocks, etc. I make enough of a return on it.
Basically, being debt-free gives me peace of mind that is worth whatever marginal return I may be getting otherwise.
1. Initially, buy 3 month T-notes equal to your max credit limit.
2. At the end of the month, transfer the dollar amount of your current credit balance and pay off your card.
3. Top off your T-bills to maintain the max credit limit amount.
4. Profit!
You just scammed the credit card companies out of a month of interest! The strategy looks even better with cash back or airline miles or points or whatever.
As I heard somewhere or another: "Get the dollars right and the pennies will take care of themselves"
In case anyone is interested, the "war1025 guide to wealth accumulation":
1. Decide a reasonable checking account balance based on your pay frequency and expenses. (I get paid weekly, so I've found that $2,000 is a good number for me.)
2. Every week when you get paid, transfer any amount in excess of amount (1) into index funds.
3. The index funds are not to be added to and never withdrawn from. (I made an exception to this rule to buy our house)
(Obviously have the correct emergency funds to handle unexpected events. Also you may at times choose to instead transfer the money into savings to work towards some known upcoming expense.)
Anyways, maybe not that profound, but the memory has stuck. By sweating the cents, you get the dollars. And there’s another saying that is different from yours that I heard my dad say constantly: every penny counts.
For what it's worth, we have a family of five, my wife stays home, and I believe we currently save somewhere in the ballpark of 35% of our income. I think that counts as being pretty frugal compared to most of the people I know.
the elevator pitch is "the google of mortgages".
The market for non-performing mortgages is more ad-hoc and you can buy an individual mortgage. But finding who owns the loan of a particular person is difficult. Also you would have to go through the trouble of foreclosing on them.
When someone buys your mortgage it doesn't change the terms of the mortgage. For the most part all that changes is who you send your payments to.
Probably the worst that they could do is (1) make you use a payment method that is inconvenient for you, such as mailing an actual check once a month, and (2) if you violate any terms of the contract be hard nosed about it.
[1] I'm actually between arch enemies at the moment, so the position is open if anyone would like to apply.
This is really the biggest challenge facing borrowers. The means of payment should really be locked in. Fortunately the servicer doesn’t always change too, but that is something that the law should probably protect.
I could imagine the law requiring the consent of the borrower to the transfer of servicer, or some similar mechanism.
Why? Some debt terms are incredibly long, such as a 20/30 year mortgage. Many soon to be paid off mortgages were signed before online banking / online payments was a thing. So you would be forcing people to continue using outdated and inefficient technology,,, b/c no reason at all.
Can you imagine the payment technology we will have 20 years from now? If I bought a house with a mortgage today, why should I be forced to continue using today's technology for another 20 or 30 years when a better technology is out there?
Is the lair a proper complex built into the side of a volcano? I'm not quite diabolical enough to make my minions work in an open office.
The nursing home turns a profit if a resident dies within a period of time where the “upfront costs” are not yet all spent. The investors profit if a resident stays alive for a long period of time in the home.
The perversion of incentives will encourage good care of the residents that maxes out their life span and to ensure that investors keep coming back.
I wonder if someone with a finance background could tease out the benefits and pitfalls of this plan.
https://en.m.wikipedia.org/wiki/Goodhart%27s_law
If you beneficially own the economics... well, great, your arch enemy is theoretically paying you money, but you have no options to screw with them. You own an extremely regulated specialty financial product. This is similar to the misconception that stock in Google entitles you to just walk in and take a computer in exchange.
If you buy the servicing rights, you have much more surface area to be an incompetent servicer, but again extremely regulated and you’re pricing yourself to being sued by the homeowner, the GSEs et al who set up the securitization program and zealously defend it, and potentially even the entity owning the economics.
My service has done dumb things, all presumable by accident, like: deposit my check into a different account, charge me a late fee and not refund; change my escrow amount 4 times in a year; not take electronic payments.
It’s annoyed me just due to stupidity. If my arch enemy owned my loan they could do stuff like change payment addresses; “lose” payments; late pay taxes and insurance.
He said something negative about Google. Let the upvotes begin!
https://www.calculatedriskblog.com/2007/02/tanta-mortgage-se...
But an AI doing all the sifting and contacting would be economical.
Wow, that is cheap. Is there a way to buy your own debt?
A service that lets you do this would be hilarious, but would probably collapse the marketability of consumer debt instruments.
If you’re a normal professional with a standing credit card debt that you pay off every month? Then no this debt is likely not for sale at a discount.
To liquidate it, or to replace it with an asset that has a better return.
> The only reason may be to release capital.
But if you have normal consumer debt and are a typical professional this isn’t likely to apply to you.
The banker's first reaction was: This can't be real. A week later, the banker called my dad back and said: Sure enough, the numbers say that we should sell you your mortgage. But we also found out that it's illegal.
I don't know the details of why it might have been illegal, but it was an amusing episode.
If so, suppose two borrowers team up and buy each others' mortgages?
See:
https://rollingjubilee.org/
https://www.theguardian.com/us-news/2016/jun/06/john-oliver-...
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You can, however, dispute your debt and make the process of collecting it legally arduous
https://debtcollective.org/
There are some difficulties in there such as the individual who got the loan written off, may have to pay income taxes on a part of the loan. It's still nice of course, but it's certainly not straightforward.
A thing you can do, quite successfully, is say “I will offer you $20, in full satisfaction of this $200 debt and anything you are tacking onto that. Give me that in writing and you’ll get a check via courier.”
(I long ago had a hobby of getting people out of consumer credit situations by writing letters, and this is one genre of the letter. Note that it won’t always work; the firm can’t make a practice of selling debt at basis, obviously, but something beats nothing and you can often convince them that those are their two options.)
It is very, very important that if one does this one gets the deal in writing, otherwise it has a bad tendency to a) be treated as a payment rather than a pay-off and b) guarantees they and other creditors will call you harder because you’ve signaled that you are in the N% of accounts willing to pay.
Whilst you're here, I must thank you for the wonderful advice in your article on that subject, which was posted in this place some years ago. If I were to distil it down to a single phrase I think it would be "present as if you're collecting a paper trail".
This was hugely helpful in helping me help my wife dispense with an egregious parking charge last year, and I feel it has put me in good stead to handle similar matters in the future.
I owe you a drink.
https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
Also, transferring loans around with the intent to declare bankruptcy is fraud, and while you may skate on that initially you won't when you're in court.
If I borrow from Peter to pay Paul, I have Peter debt now, not Paul debt.
In a court? If you borrowed from Peter to pay Paul, knowing that Peter’s debt is discharged in bankruptcy and then you declare bankruptcy? I have a feeling a not too impressed bankruptcy judge will be entering a sizable judgement against you.
Maybe the CC company could come after you if they did their research?
Well, no, because bankruptcy isn't an option most people want to pursue, and personal unsecured credit is far more expensive than student loans with the same principal unless you discharge them in bankruptcy.
Don’t try this.
if you've got student debt of $50k but only $5k available on a credit card... you're not going to be able to do this.
On top of that its going to be extremely difficult to get tens of thousands of dollars in unsecured credit, especially if you're in a position to declare bankruptcy.
If you did it knowing you were insolvent and planning to file bankruptcy, it would be illegal, and that would be taken into account in your bankruptcy (it might effect the dischargeability of the credit card debt or have other adverse consequences.)
Of course, credit cards try to keep up with your credit circumstances and adjust your credit lines appropriately, to guard against that general class of scenarios.
If you did it routinely while in good financial shape but later declared bankruptcy with the balance still on your credit card accounts, it would be discharged like any other credit card debt.
During my college days, an apartment complex tried to add on various move out fees when I didn’t renew. Despite being in active dispute with the complex about the fees, the complex ended up sending the fees to a debt collector.
Fortunately I was able to reduce the amount to an agreeable state and it never reported to the CRA. Still have clean reports to date.
Here's one: https://ripmedicaldebt.org/