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Mortgages are a manufactured product (2022)

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Re: Mortgages are a manufactured product (2022)

#41

Post by Joel_Mckay »

blackhawkC17 wrote: post #39
JumpCrisscross wrote: post #32

Earlier quoted context omitted.

> Michael Milken is the man that popularized mortgage securitization on wall-street No, he didn’t. He did high-yield corporate debt. Mortgages are neither high yield nor corporate.

It’s usually people with the least financial knowledge that rant the most and lie a lot too. Suddenly, mortgages have become a bad thing..

"Like everything else, it started off with great intentions"

https://financialpost.com/financial-times/how-bonds-ate-the-...

..and people like you... easily swayed by sycophantic idealism, and irrational greed.

Have a wonderful day, and please refrain from resorting to straw-man arguments and slander if you are feeling upset by facts. =3

Re: Mortgages are a manufactured product (2022)

#42

Post by ilya_m »

hkt wrote: post #34
Scarblac wrote: post #19

Earlier quoted context omitted.

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)

That's not correct: cash that is not in circulation is not part of "broad money" in the same way, so it is still right to say that money is created when a mortgage is issued if that mortgage is backed by large investors. At least as I understand it, investments in financial instruments are not usefully regarded as money.

> it is still right to say that money is created when a mortgage is issued if that mortgage is backed by large investors.

Is it? Since the house seller wants to have cold, hard cash (or, these days, an incoming wire transfer, which still counts as M1), the large investors need to cough up that much money to make the transaction happen.

Re: Mortgages are a manufactured product (2022)

#43

Post by bryanrasmussen »

toxik wrote: post #31
bryanrasmussen wrote: post #7

Earlier quoted context omitted.

argument clearer if it just said "it's a flow meter for money" then you can analyze that and see if it makes any sense. Can't say it makes sense for me. Maybe it makes sense for the banks, but not the person with the mortgage.

But even then, a flow meter exists and works by physical laws. The device and the contract are separate. A mortgage is an abstract agreement that works because we simulate its dynamics (well the bank does). The device and the contract are one and the same.

all analogies, metaphors, and similes will fall apart at some point as the two things being analogized are not exactly alike (otherwise there would not be any need to analogize)

Re: Mortgages are a manufactured product (2022)

#44

Post by Joel_Mckay »

hkt wrote: post #36
djbusby wrote: post #17

Earlier quoted context omitted.

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

Generational wealth theft does seem like a fair thing to complain about. Mortgages became a lever: most countries have regulations saying what lending ratios people can have, who is and is not eligible, etc. Want to control inflation over the long run? Raise interest rates and destroy the buying power of a generation. In the UK this is even more flexible, as we tend to only fix our mortgage interest rates for a few y…

The odd generation of young males still living with their parents after college is enough of a reality check for many.

I just find it fascinating people think this is somehow a controversial observation. Of course, I also welcome facts that say everything is fine, because it makes me feel more hopeful about their futures. =3

Re: Mortgages are a manufactured product (2022)

#45

Post by forgetfreeman »

hkt wrote: post #38
forgetfreeman wrote: post #26

Earlier quoted context omitted.

Conversely I remain surprised to this day that several hundred execs didn't end up with multi-decade long prison sentences for bricking the global economy with this bullshit.

What bothers me is that in various european countries - the UK, in my case - right wingers who created the mortgage market in the 1980s successfully pinned the global financial crisis on politicians .

There's a case to be made there if you assume one of government's responsibilities is to keep the financial industry from blowing up the planet.

Re: Mortgages are a manufactured product (2022)

#46

Post by Joel_Mckay »

hkt wrote: post #38
forgetfreeman wrote: post #26

Earlier quoted context omitted.

Conversely I remain surprised to this day that several hundred execs didn't end up with multi-decade long prison sentences for bricking the global economy with this bullshit.

What bothers me is that in various european countries - the UK, in my case - right wingers who created the mortgage market in the 1980s successfully pinned the global financial crisis on politicians .

I haven't really thought about the effectiveness of blame given the scope of the issues.

https://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog

It is an interesting backdrop of power that politics play out upon though. =3

Re: Mortgages are a manufactured product (2022)

#47

Post by globular-toast »

ilya_m wrote: post #42
hkt wrote: post #34

Earlier quoted context omitted.

That's not correct: cash that is not in circulation is not part of "broad money" in the same way, so it is still right to say that money is created when a mortgage is issued if that mortgage is backed by large investors. At least as I understand it, investments in financial instruments are not usefully regarded as money.

> it is still right to say that money is created when a mortgage is issued if that mortgage is backed by large investors. Is it? Since the house seller wants to have cold, hard cash (or, these days, an incoming wire transfer, which still counts as M1), the large investors need to cough up that much money to make the transaction happen.

Houses are bought in a chain, though. In a chain there might be only 1/10 people taking the cash out.

Re: Mortgages are a manufactured product (2022)

#48

Post by toxik »

bryanrasmussen wrote: post #43
toxik wrote: post #31

Earlier quoted context omitted.

But even then, a flow meter exists and works by physical laws. The device and the contract are separate. A mortgage is an abstract agreement that works because we simulate its dynamics (well the bank does). The device and the contract are one and the same.

all analogies, metaphors, and similes will fall apart at some point as the two things being analogized are not exactly alike (otherwise there would not be any need to analogize)

Of course, but a useful analogy must bring some new perspective to a thing. Here it just made me wonder what point the author is trying to make.

Re: Mortgages are a manufactured product (2022)

#49

Post by RandomLensman »

jjmarr wrote: post #15
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.…

The US generally had (has) smaller banks than Europe in relation to the economy (from regulation), so keeping mortgages on balance sheet wasn't an great option. Securitization was one way to make a financial markets product out of mortgages.

Re: Mortgages are a manufactured product (2022)

#50

Post by anamax »

hkt wrote: post #33
jjmarr wrote: post #15

Earlier quoted context omitted.

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.…

A thought I've had regularly is that any financial product so widely required ought to be provided at cost (base rate of interest) through central banks. Why bother with middlemen? As the author says, it is because the mortgage is hardly for my benefit. Its purpose is to grant some privileges to those who remain on the treadmill of work for a long time without falling off, and to act as something like a tax, levied o…

> A thought I've had regularly is that any financial product so widely required ought to be provided at cost (base rate of interest) through central banks. Why bother with middlemen?

In the US at least, govt has problems running "retail." (It also has problems running wholesale, as evidenced by the give-aways to BlackRock, but ...)

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