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Mortgages are a manufactured product (2022)

bitsaboutmoney.com

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Re: Mortgages are a manufactured product (2022)

#31

Post by toxik »

bryanrasmussen wrote: post #7
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

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.

Re: Mortgages are a manufactured product (2022)

#32

Post by JumpCrisscross »

Joel_Mckay wrote: post #11
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.

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?

> 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.

Re: Mortgages are a manufactured product (2022)

#33

Post by hkt »

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.…

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 on behalf of the absurdly wealthy + institutional investors.

Re: Mortgages are a manufactured product (2022)

#34

Post by hkt »

Scarblac wrote: post #19
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)

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.

Re: Mortgages are a manufactured product (2022)

#35

Post by EduardLev »

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…

Wow, what a great website. I wish I had found that back when I was a chemical engineer.

Re: Mortgages are a manufactured product (2022)

#36

Post by hkt »

djbusby wrote: post #17
Joel_Mckay wrote: post #13

Earlier quoted context omitted.

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?

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 years. I gather in the US rates are fixed for the life of the mortgage, or close to it.

Re: Mortgages are a manufactured product (2022)

#37

Post by blackhawkC17 »

Joel_Mckay wrote: post #25
djbusby wrote: post #17

Earlier quoted context omitted.

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

Read about Michael Milken and his friends... then reevaluate the context of the flippant hostile responses. There is a valid argument that one can't steal something if it no longer has value son. ;-)

Michael Milken dealt in junk bonds, a.k.a. very high risk bonds knowingly acquired by accredited investors.

How does his case relate to mortgages?

Re: Mortgages are a manufactured product (2022)

#38

Post by hkt »

forgetfreeman wrote: post #26
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.

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.

Re: Mortgages are a manufactured product (2022)

#39

Post by blackhawkC17 »

JumpCrisscross wrote: post #32
Joel_Mckay wrote: post #11

Earlier quoted context omitted.

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?

> 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..

Re: Mortgages are a manufactured product (2022)

#40

Post by Joel_Mckay »

blackhawkC17 wrote: post #37
Joel_Mckay wrote: post #25

Earlier quoted context omitted.

Read about Michael Milken and his friends... then reevaluate the context of the flippant hostile responses. There is a valid argument that one can't steal something if it no longer has value son. ;-)

Michael Milken dealt in junk bonds, a.k.a. very high risk bonds knowingly acquired by accredited investors. How does his case relate to mortgages?

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

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

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