I'm not sure what qualifies as wealthy, but most houses in the SF Bay Area bought in the past few years are probably financed with jumbo mortgages. E.g, 20% down on a $1MM house leaves $800k to be financed, which is greater than the $765k criteria stated in the article.
Wealthy mortgage borrowers face cold shoulder from lenders
21–30 of 191 posts
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#22The bigger the mortgage then the larger their emergency fund. Right?
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#23Earlier quoted context omitted.
> taking the umbrella now that it's raining Always found this a very strange metaphore. Banks seem to always face criticism for 1) when they don't lend to people who need it most and 2) when they do lend to people who are likely to default. It seems fairly obvious that there is a very large overlap between those groups.
The central friction is there are two conflicting views of banking: 1) Lending, insurance, and investment as a social service. People need homes. Businesses sometimes need to weather crises without bankruptcy. Startups need funding. People need educations. 2) Lending as a private investment. You want interest rate to reflect risk. Evolving monetary theory means federal interest rates are set to reflect #1. The underl…
There isn't some fundamental distinction between 1 and 2. For 1, there is obviously some positive social utility in the end or else it wouldn't be good policy. But such lending may require too much capital, too large a risk pool, or too long a time horizon for an individual private bank to take on. Instead a public or policy bank steps in.
It's good to have banks of different sizes serving different niches, as long as they assess risk prudently and price rationally. What you don't want is politicians micromanaging in domains in which they have no expertise, especially when they are driven by short-term, personal political objectives.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#24Earlier quoted context omitted.
> taking the umbrella now that it's raining Always found this a very strange metaphore. Banks seem to always face criticism for 1) when they don't lend to people who need it most and 2) when they do lend to people who are likely to default. It seems fairly obvious that there is a very large overlap between those groups.
The central friction is there are two conflicting views of banking: 1) Lending, insurance, and investment as a social service. People need homes. Businesses sometimes need to weather crises without bankruptcy. Startups need funding. People need educations. 2) Lending as a private investment. You want interest rate to reflect risk. Evolving monetary theory means federal interest rates are set to reflect #1. The underl…
Doesn’t China still have some shadow banking activity also ? You can’t abolish private banking completely, because ultimately loans are just IOU’s. Anyone can speak or write them. Even accounts receivable are very similar to loans. Private banks are just outsourced service arms of the fed anyway. you can’t really stop people from using future income to plan current investments. leverage comes from spending expected future streams of money.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#25Earlier quoted context omitted.
Payday lenders fill this gap. Everyone hates them as well. Everyone hates student loans and they fill a different gap. Basically, people hate people who lend money.
There's a reason usury was historically a serious sin.
Yes and usury is why we have an economic crisis every ten years. The magnitude of the crisis seems to be increasing each time.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#26Why exactly should we care about wealthy borrowers at this point, when millions of people are losing their jobs/health insurance...? So what if they get told no - it is not like they are living in a 500 sq ft apartment anyway
Even if you don't feel bad for them, it's still an interesting and maybe surprising story.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#27Why exactly should we care about wealthy borrowers at this point, when millions of people are losing their jobs/health insurance...? So what if they get told no - it is not like they are living in a 500 sq ft apartment anyway
You should have empathy for everyone. You should have empathy for the pain poor people experience and the pain the rich people experience. Someone's income doesn't make them more or less human.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#28Earlier quoted context omitted.
The central friction is there are two conflicting views of banking: 1) Lending, insurance, and investment as a social service. People need homes. Businesses sometimes need to weather crises without bankruptcy. Startups need funding. People need educations. 2) Lending as a private investment. You want interest rate to reflect risk. Evolving monetary theory means federal interest rates are set to reflect #1. The underl…
There isn't some fundamental distinction between 1 and 2. For 1, there is obviously some positive social utility in the end or else it wouldn't be good policy. But such lending may require too much capital, too large a risk pool, or too long a time horizon for an individual private bank to take on. Instead a public or policy bank steps in. It's good to have banks of different sizes serving different niches, as long a…
The fundamental difference is in incentives. If your incentive is to generate profits, you don't want to lend to the high-risk needy because you'll lose money. If your incentive is to provide another form of social security, you're willing to subsidize.
The problem comes when you force a business that really wants to align to the profit incentive (banks) to provide social subsidy by effectively charging their profit-generating customer base a premium. 1. They're incentivized to do the bare minimum necessary. 2. They're incentivized to stick to the letter and not the spirit of the law. 3. The transfer of wealth from paying to subsidized customers is opaque and nobody can do proper accounting.
This is a major source of corruption and inefficiency. It's the sort of problem that's all over the place whenever the private sector is forced into providing this sort of opaque cross-subsidy.
If I were to re-do this from scratch I'd privatize all the banks and let them do just the profit-making part, and have social programs solely as a function of the government, with a set yearly budget.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#29Earlier quoted context omitted.
> taking the umbrella now that it's raining Always found this a very strange metaphore. Banks seem to always face criticism for 1) when they don't lend to people who need it most and 2) when they do lend to people who are likely to default. It seems fairly obvious that there is a very large overlap between those groups.
The central friction is there are two conflicting views of banking: 1) Lending, insurance, and investment as a social service. People need homes. Businesses sometimes need to weather crises without bankruptcy. Startups need funding. People need educations. 2) Lending as a private investment. You want interest rate to reflect risk. Evolving monetary theory means federal interest rates are set to reflect #1. The underl…
Your comment reads just like a lecture I had from an excellent econ professor. Nice job!
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#30Why exactly should we care about wealthy borrowers at this point, when millions of people are losing their jobs/health insurance...? So what if they get told no - it is not like they are living in a 500 sq ft apartment anyway
You should have empathy for everyone. You should have empathy for the pain poor people experience and the pain the rich people experience. Someone's income doesn't make them more or less human.
Nobody is arguing that rich people don't bleed or don't feel pain. The point here is that for rich people a rent strike is a nuisance, but for renters the alternative to a rent strike is homelessness, or not being able to afford their medicine, or something equally catastrophic. That's why you don't see rent strikes everywhere, you see them where renters have their backs against the wall.