Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Mortgages are a manufactured product (2022)

bitsaboutmoney.com

Post reply on HN
Print view View original

91–100 of 127 posts

Re: Mortgages are a manufactured product (2022)

#91

Post by jjav »

mindvirus wrote: post #65

This is a fascinating article, though I'm not sure I grok the analogy about flow meters. Given they're so securitized, I wish I could buy back my own mortgage at a discount given how much interest rates have risen. It feels that given the notes about conforming mortgages being fungible, that product/service should exist.

> I wish I could buy back my own mortgage at a discount given how much interest rates have risen

You can! Even if not directly. Take the lump sum cash you'd have to use to buy off your mortgage today. Put it into an interest-bearing instrument of your choice that is paying these higher rates today (higher than your mortgage). Us that to pay the monthly mortgage and the different is profit.

Re: Mortgages are a manufactured product (2022)

#92

Post by [deleted] »

ramchip wrote: post #80
sanxiyn wrote: post #22

I know this post is about money, but I want to talk about electronic flow meters than money so I will. The description of "Japanese company making the best electronic flow meters" strongly suggests it is Keyence. They are the best indeed. Keyence is the 3rd largest Japanese company by market capitalization, next to Toyota and Japan's largest bank (Mitsubishi). Larger than Sony, larger than Nintendo, larger than Honda…

Very tangential, but as a worker in Japan I find it depressing how Keyence's recruiting material proudly shows a software engineer's typical day that starts at 8:30AM and ends around 8:00PM. No wonder it's so hard to raise kids. https://www.keyence.co.jp/jobs/software-engineer/

[deleted]

Re: Mortgages are a manufactured product (2022)

#93

Post by jjav »

maxerickson wrote: post #72
refurb wrote: post #21

Earlier quoted context omitted.

It has the effect of being able to provide homeowners with cheap 30-year fixed mortgages. I'm surprised you're against it.

Adding leverage to the housing market probably isn't a net good thing. Especially when you have a mismatch between demand for desirable housing and the available supply. It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supp…

> Adding leverage to the housing market probably isn't a net good thing.

The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know).

But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor.

If we complain today that raising a 20% down payment towards a million dollar house is very difficult, would it be any easier if that house cost (let's say) 600K but you have to raise the whole 600k up front?

I'm generally against having debt, but mortgages are a wonderful thing.

Re: Mortgages are a manufactured product (2022)

#94

Post by [deleted] »

deprecative wrote: post #61
anamax wrote: post #50

Earlier quoted context omitted.

> 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 ...)

The US certainly has issues with even accepting the government being able to do good things. A small but highly vocal part of the populace has all but ensured the well is poisoned. I think we could, if we wanted, create an institution like the USPS for financial services. That would be able to issue a mortgage. It's not going to happen for the simple fact they're doing their best to privatize the USPS and beloved pro…

[deleted]

Re: Mortgages are a manufactured product (2022)

#95

Post by maxerickson »

jjav wrote: post #93
maxerickson wrote: post #72

Earlier quoted context omitted.

Adding leverage to the housing market probably isn't a net good thing. Especially when you have a mismatch between demand for desirable housing and the available supply. It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supp…

> Adding leverage to the housing market probably isn't a net good thing. The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know). But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor. If we complain today that raising a 20% down pa…

The comments I replied to are pretty specifically talking about government supported 30 year fixed mortgages, rather than mortgages in general. I guess I could have spelled out the context I thought was implied?

Re: Mortgages are a manufactured product (2022)

#96

Post by formerly_proven »

Panzer04 wrote: post #64
hkt wrote: post #33

Earlier quoted context omitted.

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…

The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market? Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).

Maybe that’s because Americans move around more and can’t be nailed to a house for 15-30 years like every european homeowner is (where you can neither refinance nor pay back early without paying essentially all future interest payments at once - US mortgage conditions are insanely good).

Re: Mortgages are a manufactured product (2022)

#97

Post by patrickthebold »

mindvirus wrote: post #74
taffer wrote: post #67

Earlier quoted context omitted.

> I wish I could buy back my own mortgage at a discount given how much interest rates have risen But why would you want to do that? If you take out a fixed-rate loan and interest rates rise, you are already making a profit. Financially, there would be no further benefit from the buy-back of the loan.

Presumably I'd be able to buy it back at $0.60 on the dollar since that's what the market value of a low interest mortgage would be on today's market of 7% mortgage rates. I'd want to do it so I could sell my place and move. No doubt if I sell my place now, the bank is just taking that money and lending it out again, making a profit on the difference in rates.

Yes, but that boils down to changing the terms of your loan in your favor.

You probably should ask yourself: How much of a premium on your mortgage would you have paid to have the option to pay it off at market rates if rates happen to go up.

A similar example: in the US, typically loans have no prepayment penalty, but in practice you are paying for that option. I'm theory you could get a lower rate if you agreed to a high fee if you prepay.

I think it ends up not being worth it for lenders to give you so many options when picking your loan terms, simply because lots of people won't understand the subtitles/there's not much demand for those products.

Re: Mortgages are a manufactured product (2022)

#98

Post by rsynnott »

Panzer04 wrote: post #64
hkt wrote: post #33

Earlier quoted context omitted.

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…

The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market? Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).

Eh, I think that’s a slight exaggeration. In Ireland you can get a 3.8% 30 year fix which allowed overpayment of up to 10% of balance/year, and redemption penalties capped at 2% of balance. This is, in practice, cheaper than virtually any US mortgage today, unless you’re only planning to keep the mortgage a few months.

Granted, that’s kind a _weird_ product; I think only one lender provides it, and the market norm is definitely for fixes in the 5 year range (often with redemption penalties waived if you’re moving); after 5 years, you either transition to a variable, move lender, or re-fix. This seems to be more of a market norm/preference thing, though; Avant, the lender who does the 30 year one, appears to be able to make it work economically.

One oddity in the Irish market that maybe makes this easier is that mortgage lenders are only allowed charge, essentially, at most the cost to _them_ of breaking a fix as an early redemption fee. In practice, this is usually not all that high and may be zero. I’m not sure how many other countries have this rule.

Re: Mortgages are a manufactured product (2022)

#99

Post by rsynnott »

formerly_proven wrote: post #96
Panzer04 wrote: post #64

Earlier quoted context omitted.

The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market? Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).

Maybe that’s because Americans move around more and can’t be nailed to a house for 15-30 years like every european homeowner is (where you can neither refinance nor pay back early without paying essentially all future interest payments at once - US mortgage conditions are insanely good).

In general, in Europe, either:

- It is the norm to use either a variable rate or series of short fixed rates

OR

- Redemption fee is capped (for instance in France it’s capped at one quarter worth of interest).

I’m not sure it’s normal anywhere to have a 30 year fix which you can’t get out of? Which country are you thinking of?

Re: Mortgages are a manufactured product (2022)

#100

Post by evolve2k »

Can someone here help me unpack social impact financing or what is also called a social loan in the context of this article.

Social impact financing is a range of approaches that help fund social causes by bringing new financial products beyond just giving donations and hoping for the best.

A social loan essentially provides a low interest loan to say a social enterprise that explicitly seeks to produce a measurable social outcome in addition to meeting basic financial obligations.

An example is a social housing trust that exists to provide more disability housing.

My question is what’s the dynamic with the various players? I can see on one end is a “social investor” who is willing to provide/invest capital for a below market earning rate (in exchange for knowing the social outcomes are occurring).

And at the other is the social enterprise obtaining the funds. But what’s the dynamic in the middle?

I’m trying to access these sorts of funds so trying to understand better the impact / neutrality or otherwise of various parties involved in manufacturing a fairly niche social loan product.

Post reply on HN