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Mortgages are a manufactured product (2022)

bitsaboutmoney.com

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Re: Mortgages are a manufactured product (2022)

#11

Post by Joel_Mckay »

abrichr wrote: post #8
Joel_Mckay wrote: post #4

The securitization of mortgages, health care, and education. All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design. Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures. Thank god it is not my task to try…

FTA: > A widespread misconception about mortgage securitization is that it was created to make Wall Street rich. … > Mortgage securitization, and secondary sales of loans, and other mechanisms cause mortgages to migrate from the banking sector to pools of capital which are more structurally insulated against the interest rate cycle.

Michael Milken is the man that popularized mortgage securitization on wall-street.

Eventually convicted, then pardoned by #45..

Exactly how is this not dodging accountability son?

Re: Mortgages are a manufactured product (2022)

#12

Post by o11c »

Joel_Mckay wrote: post #4

The securitization of mortgages, health care, and education. All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design. Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures. Thank god it is not my task to try…

> People are angry, but often for the wrong reasons since wall-street washes accountability by design.

Counterpoint: just as we treat everyone involved in money-laundering as criminal, it is morally obligatory to treat everyone involved in responsibility-laundering as blameworthy.

"Remember the human" is a critical feature of every good social construct, but fundamentally impossible for some of the laundering business constructs that are considered ideologically mandatory today.

Re: Mortgages are a manufactured product (2022)

#13

Post by Joel_Mckay »

o11c wrote: post #12
Joel_Mckay wrote: post #4

The securitization of mortgages, health care, and education. All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design. Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures. Thank god it is not my task to try…

> People are angry, but often for the wrong reasons since wall-street washes accountability by design. Counterpoint: just as we treat everyone involved in money-laundering as criminal, it is morally obligatory to treat everyone involved in responsibility-laundering as blameworthy. "Remember the human" is a critical feature of every good social construct, but fundamentally impossible for some of the laundering busines…

Counterpoint: unless the value siphon effectively steals opportunity cost options from you 25 years before you are born.

It takes real ignorant psychopathy to blame victims of the greatest crime in history.

Re: Mortgages are a manufactured product (2022)

#14

Post by SpicyLemonZest »

yareal wrote: post #10
abrichr wrote: post #8

Earlier quoted context omitted.

FTA: > A widespread misconception about mortgage securitization is that it was created to make Wall Street rich. … > Mortgage securitization, and secondary sales of loans, and other mechanisms cause mortgages to migrate from the banking sector to pools of capital which are more structurally insulated against the interest rate cycle.

Which has the effect of....? At the end of the day, the reasons these choices exist is to make someone rich. The mechanism (shielding from interest rate cycles) is just an implementation detail.

It's not just an implementation detail. In the 80s there was a big event known as the S&L crisis (https://en.wikipedia.org/wiki/Savings_and_loan_crisis), where an interest rate spike which was not adequately shielded led a substantial fraction of all US mortgage lenders to fail.

Re: Mortgages are a manufactured product (2022)

#15

Post by jjmarr »

mvkel wrote: post #3

> If you replaced your current mental model for mortgages with “it’s like a paper electronic flow meter for money, possibly with less paper these days”, it would improve your ability to understand the mortgage industry. I feel even more confused

The thesis is that mortgages are not primarily a service a bank provides to a homeowner. They are a financial product that banks sell to institutional investors (as an example) that want a guaranteed cashflow decades into the future.

Of course, a multibillion dollar pension fund does not want to directly write John Doe a mortgage and deal with him. Their business is giving money to pensioners, not selling mortgages. They would rather buy a bundle of thousands of mortgages at once and outsource the hassle of taking the payments to someone else.

The bundling and administration of mortgages is akin to a manufacturing process for electronic flow meters. The customer just cares about seeing a number go up, and pension funds just want to see money hit their accounts.

Since a great way of turning a bunch of cash upfront into a larger amount of cash over decades is through mortgages, banks unfortunately have to find actual people and help them buy a house.

Re: Mortgages are a manufactured product (2022)

#17

Post by djbusby »

Joel_Mckay wrote: post #13
o11c wrote: post #12

Earlier quoted context omitted.

> People are angry, but often for the wrong reasons since wall-street washes accountability by design. Counterpoint: just as we treat everyone involved in money-laundering as criminal, it is morally obligatory to treat everyone involved in responsibility-laundering as blameworthy. "Remember the human" is a critical feature of every good social construct, but fundamentally impossible for some of the laundering busines…

Counterpoint: unless the value siphon effectively steals opportunity cost options from you 25 years before you are born. It takes real ignorant psychopathy to blame victims of the greatest crime in history.

What's the crime? Mortgages? I'm not following you. Some generational wealth theft somehow?

Re: Mortgages are a manufactured product (2022)

#18

Post by rwmj »

> A mortgage has a quirky little subcomponent called a Mortgage Servicing Right (MSR). Every month, it needs to collect money from the borrower and send that money… somewhere. This implies, minimally, a mailbox where you can send checks, someone to open the mail, and a phone number with a CS representative who can answer questions like “What is my current balance?” and “Did you get the last check I sent you?”

Like, seriously? Sending bits of paper through the post to make payment? Having to call someone up instead of logging in to your mortgage account online?

Re: Mortgages are a manufactured product (2022)

#19

Post by Scarblac »

20240519 wrote: post #16

I thought the weird thing about mortgages is it is new money that expands the money supply.

Not necessarily, that's only if it's financed by bank accounts that continue being money themselves. If they're financed by large investors, it's not new money.

(it's money if its extremely liquid - the bank account holders can still do things with their invested money)

Re: Mortgages are a manufactured product (2022)

#20

Post by refurb »

Joel_Mckay wrote: post #4

The securitization of mortgages, health care, and education. All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design. Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures. Thank god it is not my task to try…

> All were simply fund-managers monetizing other peoples misery

No, mortgage securitization simply provides a simple, consistent product that you can sell to investors. Securitization was created by the government, not by a banker.

It allows homeowners to access capital that they otherwise couldn't - it's a pretty limited pool of investors willing to buy individual, non-conforming mortgages.

If mortgages weren't securitized, then the government would need to provide the funds for all the mortgages - which means a lot less mortgages.

And I have no idea what "securitization" of healthcare and education means. It sounds like you learned a new word and just use it to replace "bad things I don't like".

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