Do we fully understand mortgages?

redpete

the_worm_that_turned wrote: »

See post two above by me. I am not doubting that a seller receives money. What I do question is where that money has come from and how it was formed.

So what was the relevance of "Let's consider for one minute that the bank didn't actually lend me any money." or "there is nothing in black & white about me receiving money whatsoever." or "it could be argued that they provided me with the money to purchase the house, but I have no evidence whatsoever to support this" or "... agreed to pay back money in return for the bank providing a facility. There is no mention of them loaning me money in the agreement/contract!! "?

If you feel uncomfortable reading my posts then don't but please don't try and be clever with me as I find it offensive.

I don't feel uncomfortable but the accusation is one that one frequently sees from proponents of wild theories that are disagreed with - e.g. "You don't want to hear because it is too dangerous a truth." I was just confused as to what the point is and I disagree with what I thought was your basic premise but apparently isn't now. When someone suggests that the whole basis for mortgages could be illegal (your comment about trust deeds) I think it is time to stop reading, so I probably will.

Finally (for now) I wasn't "being clever" with you, just mildly rude.

the_worm_that_turned

redpete wrote: »

So what was the relevance of "Let's consider for one minute that the bank didn't actually lend me any money." or "there is nothing in black & white about me receiving money whatsoever." or "it could be argued that they provided me with the money to purchase the house, but I have no evidence whatsoever to support this" or "... agreed to pay back money in return for the bank providing a facility. There is no mention of them loaning me money in the agreement/contract!! "?

I don't feel uncomfortable but the accusation is one that one frequently sees from proponents of wild theories that are disagreed with - e.g. "You don't want to hear because it is too dangerous a truth." I was just confused as to what the point is and I disagree with what I thought was your basic premise but apparently isn't now. When someone suggests that the whole basis for mortgages could be illegal (your comment about trust deeds) I think it is time to stop reading, so I probably will.

Finally (for now) I wasn't "being clever" with you, just mildly rude.

Perhaps (if you can be bothered) you could re-read my posts. I am suggesting in the opening post that I didn't receive money. That doesn't mean that the seller will not receive money does it?

I am talking from facts. Fractional reserve banking, deeds of trust, promissory notes, security (mortgage) backed assets etc all exist. It is not wild theory. I am merely attempting to encourage people to question things.

If you are perfectly comfortable with the system and fact that to buy a home requires the use of a bank and extortion then great. But I am not!

redpete

I knew I wouldn't be able to resist it.

the_worm_that_turned wrote: »

Perhaps (if you can be bothered) you could re-read my posts. I am suggesting in the opening post that I didn't receive money. That doesn't mean that the seller will not receive money does it?

I read and re-read your posts to try to understand why you are making such a point about you not receiving the money. It seems irrelevent that you didn't get the money handed to you as bags of £1 coins so that you could pass them on to the person you bought the house from. The money went in electronic form from the lender's account to your solicitor's account and onwards to your seller's account (in many cases, I actually got the money in my very own account when I extended the mortgage to fund an extension, so I saw it in real black ink on my account statement).

If you are perfectly comfortable with the system and fact that to buy a home requires the use of a bank and extortion then great. But I am not!

I'm happy that a bank is involved, without them I wouldn't have been able to afford to buy a house until I was close to retirement age. I chose to own a home and get a mortgage to fund it. I see no extortion (the bank hasn't unlawfully obtained money from me through coercion).

The reason someone suggested this elsewhere is that most of these boards are for asking and answering questions of fact, not debating theories. The board entitled Debate House Prices & the Economy seems the perfect home for this thread.

the_worm_that_turned

redpete wrote: »

I knew I wouldn't be able to resist it.



I read and re-read your posts to try to understand why you are making such a point about you not receiving the money. It seems irrelevent that you didn't get the money handed to you as bags of £1 coins so that you could pass them on to the person you bought the house from. The money went in electronic form from the lender's account to your solicitor's account and onwards to your seller's account (in many cases, I actually got the money in my very own account when I extended the mortgage to fund an extension, so I saw it in real black ink on my account statement).

I'm happy that a bank is involved, without them I wouldn't have been able to afford to buy a house until I was close to retirement age. I chose to own a home and get a mortgage to fund it. I see no extortion (the bank hasn't unlawfully obtained money from me through coercion).

The reason someone suggested this elsewhere is that most of these boards are for asking and answering questions of fact, not debating theories. The board entitled Debate House Prices & the Economy seems the perfect home for this thread.

So you are happy that you would not be able to buy a house (the thing required to survive in the elements we are exposed to i.e. without one we would most likely die of exposure) until close to retirement age! Well that is entirely up to you but I am not happy with that for me or my other fellow humans.

I think you are missing the point. So to make it as clear as possible...

I signed a loan offer agreement. Within that there was no mention of the bank providing me (whether in bags of gold coin, notes or even transferred to a solicitors account) any money. What it actually said was that I would pay them for borrowings in a facility (bank account) that they would arrange i.e. they would create an account with an overdraft facility.

The seller (or in my case bank as it was a remortgage) may well have received money but IT MIGHT NOT HAVE ACTUALLY BEEN MONEY THAT WAS LENT TO ME BY THE BANK i.e. it was money CREATED as a result of me signing a promissory note.

Does that make more sense and/or is it any clearer to you?

With regards to creating this thread, I have concerns that the mortgage process is not as we are led to believe hence raising it here for discussion as 100,000's of others are potentially in the same boat.

opinions4u

What a complete load of tosh.

Conrad

the_worm_that_turned wrote: »

If you are perfectly comfortable with the system and fact that to buy a home requires the use of a bank and extortion then great. But I am not!

What system would you prefer?

the_worm_that_turned

Conrad wrote: »

What system would you prefer?

Affordable homes would be a start.

the_worm_that_turned

opinions4u wrote: »

What a complete load of tosh.

So far two fantastic posts. Any more gems?

kmmr

the_worm_that_turned wrote: »

Let's consider for one minute that the bank didn't actually lend me any money. Instead they acquired the house and provided it to me in exchange for a promissory note (a signed document whereby I promise to pay the bank an amount equivalent to the supposed loan + interest). There is some oddness in this comment - but its sort of right. Forget how the house came into the equation, just consider it as security. Could be a house, a car, a rembrant... whatever. So you now have a secured loan.

Only difference is that at the end you get to own the house. Otherwise it would be a long term rental. So, lets assume you now have a secured loan that you are paying interest on, and the bank have your 'promissory note'. (and a bit of back up security if you don't pay.)

That promissory note (note) is legal tender and is also known as a bill of exchange. The bank can pool/bundle this together with other notes into securitised investment instruments. Which is what they do. That is what securitization is, using a bundle of mortgages/BTL's/whatevers to create a sort of megamortgage, which is then put into an investor friendly form.

These can then be used to attract investors (with a guaranteed return - say 8%) and in return the bank can actually make even more money off the back of my signature. "Guaranteed" is an interesting term here. They didn't end up being guaranteed! Have a chat to some Lehman traders about how "guaranteed" the returns were. Actually the investor should be taking the credit risk against you - but this is diluted by having lots of bits of hundreds of mortgages. But... very dangerous as the recent years have shown us.

This isn't la la land talk, this is fact and is linked to the supposed credit crunch/recession (soon to be depression). Different story though. In addition, and quite possibly linked, the banks can sell on the note(s) and make a tidy profit. This is not illegal but is certainly not disclosed up front. They sort of make money. They more save costs. Secured borrowing (for the bank, ie secured against the pool of mortgages) is (was) a cheaper form of borrowing, so it reduces costs, and allows them to lend at more competitive margins. We get to borrow more... at better rates... and the cycle continues.

So, thus far, I have promised to pay the bank and in exchange I have become the legal owner (title holder) of the house. They have provided me a house (somehow) and it could be argued that they provided me with the money to purchase the house, but I have no evidence whatsoever to support this. I'm ignoring this paragraph!

So is it possible that using money created from earlier pooled/bundled investment opportunities (or from my note and others) they purchased/acquired my house and offered it to me in exchange for the note? Absolutely. That is where the money came from in recent years. Hence a boom in lending, as the banks could lend to customers, sell the loans to investors, then lend to us again and again... the US problems are HUGELY linked to these trades. It's not illegal, and all seemed fine until various big things went wrong. But - that is for the next economics lesson.

In a bizarre sort of way you are right, but just explained in a strange manner.

GMS

Whatever the rights and wrongs contained within this post are there really is no need for the average Joe to have an in depth understanding of how lending and securitisation work.

the worm, what is it you are hoping to acheive from this? Do you want to prove misselling of mortgages?

The simple fact is there are 2 ways to purchase almost anything, especially property. You pay in cash or you borrow the money from a lender prepared to lend to you.

A £100 pair of shoes may look expensive but can be saved for within a reasonable timescale and still be a £100 pair of shoes.

A £100,000 house is way beyond the vast majority of people's cash reserve, and saving for it would lead to it being a £200,000 house way before the £100,000 was saved (for example)

As a result a loan (mortgage) is taken out to purchase the property. What happens to the loan is pretty much irrelevant after that. If the customer maintains the mortgage as per the terms they will own the property. If they change lenders the process starts again.

There would be very few people who care how the mortgage was funded as without it there would be no way to purchase the property.