Mortgage Companies

[Dalt]

I've seen 'Money masters','Money as debt' and The creature from Jekyll Island and have a good understanding of the way banks relate to mortgages but how do companies like Preferred Mortgages work? http://www.preferredmortgages.com

I called them recently and was told, tentatively, that they lend their investors' money but only after being passed from pillar to post for 20 minutes. The person who eventually answered me did not seem comfortable with my query. Can anyone shed any light on the subject?

[Dalt]

63 views thus far and not one opinion. Difficult question, or just one with an obvious answer...?

[farmer_giles_of_ham]

I looked at the link and all I got from it was that this was a kind of brokerage service, matching customers with banks. An intermediary.

Banks still work as usual. There are many services out there that front for banks. I just became aware of companies in the UK that offer to buy a real property for 85% of the "open-market value", and they pay all the transaction costs. Deal gets closed in less than 2 weeks. Thats very good, unless you aren't at all in a hurry to sell. They even offer to rent the place back for a 'fair rent shorthold lease'- so this is a better deal than a mortgage, because there at least there are less papers and hoops to jump. No credit issues, or status, just ownership.

A google search should find several 10's of sites offering this package. And these people have bank banking, or private money, but at some point, the currency mechanism is working.

[Dalt]

Originally Posted by farmer_giles_of_ham

I looked at the link and all I got from it was that this was a kind of brokerage service, matching customers with banks. An intermediary.

Banks still work as usual. There are many services out there that front for banks. I just became aware of companies in the UK that offer to buy a real property for 85% of the "open-market value", and they pay all the transaction costs. Deal gets closed in less than 2 weeks. Thats very good, unless you aren't at all in a hurry to sell. They even offer to rent the place back for a 'fair rent shorthold lease'- so this is a better deal than a mortgage, because there at least there are less papers and hoops to jump. No credit issues, or status, just ownership.

A google search should find several 10's of sites offering this package. And these people have bank banking, or private money, but at some point, the currency mechanism is working.

Thanks for your reply. My reason for the question is that I'm ready to start testing a little of what I've learned from Mary Croft and others. I'm preparing to ask them to show me proof of the debt, proof that I'm involved in a valid contract with mutual consideration from both parties.
My uncertainty comes from the fact that 99.9% of the information on these matters pertains to the US and Canada and I've seen practically nothing that indicates a)The UK is still bankrupt (i'm aware we were just after the 2nd world war and we do have a fiat currency) b) that The Bank of England is in private hands c) We Brits have 'unlimited credit', as the Canadians are purported to have d) Mortgages can be paid off using the 'vessel's trust'.

If you can shed light here too, I'd be very grateful. I take it you're Canadian?

[Extramural]

Originally Posted by Dalt

d) Mortgages can be paid off using the 'vessel's trust'.

Just found this interesting:

Vassal

[farmer_giles_of_ham]

I am very international at this point, but I am originally from the 'Mid-Atlantic Seaboard', somewhat south of Canada. My English comes from both sides of the pond- as for Canada, I follow the "Trailer Park Boys" and the rock group Rush was always a favorite.

My take on the money issue is that there could be a valid contract, you got something, you gave something, etc. The only real issue impacting us is the amortization clause in this contract- we are supposed to buy the bank's position back from them, on a monthly basis.

Yet any given mortgage can be re-financed or re-negotiated at any time- this is exactly the sort of business banks do all the time. And the interest just keeps the level of indebtedness at par with inflation, if that- overall the typical note experiences a loss of value, from inflation, like all other deposits in currency.

If banks are willing, generally, to finance a given loan-to-appraised value (LTV), say 80%, then they should be willing to do so constantly, without the difficulty and extra cost involved with a re-finance. Just re-fi every day, automatically. Fold the interest due into the principal amount, keeping the debt at balance with the value of the asset. It shouldn't have anything to do with personal creditworthiness, or status, just the fact that the property itself supports, at any given moment, a certain level of debt.

Example- today a mortgage is given for 100, justified by all the ordinary procedures. Next year, the same amount of economic value would have to be 110, because of inflation. Thats 10% interest a year, the rate of current inflation; meanwhile if you look around the average mortgage rate today is less than that. So all I want is balance: if the house is good for 100 this year, it's good for 100 next year, all other things being equal. Only 100 next year is 110, from inflation. And there is the interest payment.

Most of the interest due on any money is just to cover the loss in value of the asset. (so much for 'usury'), In fact, the way the system has worked for a while now, is that currency issues at below cost, always depreciating, even when interest charges are factored.

The overall level of debt in any given economy grows mostly by the amount of interest and costs, and so does the money supply. Basically, they charge interest and then issue new credit to cover. This is exactly the operation of governments; the level of public debt (the deficit) grows by at least as much as any interest due, and the total capital is guaranteed every year by re-issue. The debt always grows, and so does inflation, so the overall value stays about even.


Another solution is simply to sell a static lien on the property. "I hereby deed the unlimited value of this house at auction to BANK OF X", or to whoever. That lien has a value on the open market. The title, and therefore the use of the house, stays with the owner, and the value has been converted to a recognizable asset the bank can then issue currency upon, at a discount, for their profit. All they really do is negotiate 'oblique ownership' in properties- the commercial value.

The point in all this is that finance just monetizes the value of the property, whether it is real estate, employment, or whatever asset-class is legally available.

Where does that leave you? Maybe it is a good arguement in equity- the contract is cumbersome, anti-social, needlessly burdens you the debtor, and can be resolved by much simpler means.

There is a larger political issue behind the financial system, and there are probably laws that establish certain priorites in lending practice- the banks are public entities. It's not as though they stand anything to lose by 'true-zero amortization', as described above- we would all be happy just to have the use of the house, without worrying about the equity. I just need a key, really. If I want to invest in real estate equity that's a seperate matter.

I want to add that there are many other issues in law that can relate here. An important one is PRIORITY- to whose claims does the law give greater and lesser weight. Different liens come ahead one from the other, even if recorded at a later date. (mechanics liens come to mind) It may be possible to make your own claim, 'beat the mortgage', just by using the law.

Interestingly enough, in the Napoleonic Civil Law systems used by at least several countries in Europe, certain classes of creditor are given priority over others. Those that are called 'SECURE' are automatically ahead of 'HYPOTHETICAL'. All mortgages and such are considered, 'hypothetical'. The name for a mortgage in Spanish, for example, is hipoteca. Insurance and mutual assurance policies are called seguros.