Mortgage Rate Quotes

The writer Umberto Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with “Wow! Signore, professore dottore Eco, what a library you have ! How many of these books have you read?” and the others - a very small minority - who get the point that a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you don’t know as your financial means, mortgage rates and the currently tight real-estate market allows you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menancingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.

Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market alow you to put there.

We have not noticed how fast the rest has risen. Most of the industrialized world--and a good part of the nonindustrialized world as well--has better cell phone service than the United States. Broadband is faster and cheaper across the industrial world, from Canada to France to Japan, and the United States now stands sixteenth in the world in broadband penetration per capita. Americans are constantly told by their politicians that the only thing we have to learn from other countries' health care systems is to be thankful for ours. Most Americans ignore the fact that a third of the country's public schools are totally dysfunctional (because their children go to the other two-thirds). The American litigation system is now routinely referred to as a huge cost to doing business, but no one dares propose any reform of it. Our mortgage deduction for housing costs a staggering $80 billion a year, and we are told it is crucial to support home ownership, except that Margaret Thatcher eliminated it in Britain, and yet that country has the same rate of home ownership as the United States. We rarely look around and notice other options and alternatives, convinced that "we're number one.

What if one were up there, drifting about among suns and feeling the tails of comets fan one's forehead! How small the earth was and how puny the people; a Norway of two million provincial souls and a mortgage bank to help feed them! What was life worth at such a rate? You elbowed yourself ahead in the sweat of your face for a few mortal years, only to perish all the same, all the same!

Middle-class and more affluent blacks are also disproportionately the targets of subprime mortgage loans, paying much higher rates of interest than comparable white borrowers, and are subjected, according to the available evidence, to racial profiling of all types.

. . . the farmer is the man The Farmer is the man Lives on credit till the fall With the interest rates so high It's a wonder he don't die And the mortgage man's the one that gets it all. The farmer is the man The farmer is the man Lives on credit till the fall And his pants are wearing thin His condition it's a sin He's forgot that he's the man that feeds them all.

The “consumer loan” piles that Wall Street firms, led by Goldman Sachs, asked AIG FP to insure went from being 2 percent subprime mortgages to being 95 percent subprime mortgages. In a matter of months, AIG FP, in effect, bought $50 billion in triple-B-rated subprime mortgage bonds by insuring them against default.

We were taking out mortgages we couldn’t afford because they were camouflaged to look as if we had a reasonable chance of paying them back. Banks then changed the bankruptcy laws so that we could not get out of our obligations once the rates changed. Lastly, they sold us back our own mortgages, shifting back to us any of the risk through our money-market accounts and pension funds.

So now as always you could get AAA ratings, not for subprime mortgages, obviously bad, but for submarine mortgages, clearly much better! And the fact that all submarine properties were in some sense extremely subprime was not mentioned except as one aspect of the very lucrative risks involved.

Engaged in a new form of serfdom---only bound now to banks and mortgage lenders instead of to lords---her more highly leveraged neighbors pore over the business section of the newspaper each day looking for some sign that the government will soon step in to “freeze” their mortgage rates where they are before a scheduled adjustment hits.

we’re helping the consumer. Because we’re taking him out of his high interest rate credit card debt and putting him into lower interest rate mortgage debt.

Including the differential mortgage loan approval rates between Asian Americans and whites shows that the same methods to conclude that that blacks are discriminated against in mortgage lending would also lead to the conclusion that whites are discriminated against in favor of Asian Americans, reducing this whole procedure to absurdity, since no one believes that banks are discriminating against whites..."[W]hen loan approval rates are not cited, but loan denial rates are, that creates a larger statistical disparity, since most loans are approved. Even if 98 percent of blacks had their mortgage loan applications approved, if 99 percent of whites were approved than by quoting denial rates alone it could be said that blacks were rejected twice as often as whites.

The traditional fixed-rate 30-year mortgages, which were once a majority of all mortgages, were no longer a majority during the housing boom, as ARMs and other “creative” ways of financing the purchase of a home grew rapidly to cope with soaring housing prices. Such innovative mortgages quickly went from being rare to becoming common, especially in places with very high housing costs.

Mike Burry didn’t own any triple-B-rated subprime mortgage bonds, or anything like them. He had no property to “insure”; it was as if he had bought fire insurance on some slum with a history of burning down.

The ARM, Adjustable Rate Mortgage, was invented in the early 1980s. Prior to that, those of us in the real estate business sold fixed-rate 7 or 8 percent mortgages. What happened? I was there in the middle of that disaster of an economy when fixed-rate mortgages went as high as 17 percent and the real estate world froze. Lenders paid out 12 percent on CDs but had money loaned out at 7 percent on hundreds of millions of dollars in mortgages. They were losing money, and lenders don’t like to lose money. So the Adjustable Rate Mortgage was born, in which your interest rate goes up when the prevailing market interest rates go up. The ARM was born to transfer the risk of higher interest rates to you, the consumer. In the last several years, home mortgage rates have been at a thirty-year low. It is not wise to get something that adjusts when you are at the bottom of rates! The mythsayers always seem to want to add risk to your home, the one place you should want to make sure has stability. Balloon mortgages are even worse. Balloons pop, and it is always strange to me that the popping sound is so startling. Why don’t we expect it? It is in the very nature of balloons to pop. Wise financial people always move away from risk, and the balloon mortgage creates risk nightmares.

It turns out that addressing the most urgent problems of our time is, well, hard. But what is maddening about this debate is not how difficult fair-tax implementation would be but how utterly easy it is to find enough money to defeat poverty by closing nonsensical tax loopholes. If you don’t like the changes I suggested above, I can propose twenty smaller reforms, or fifty tinier ones, or a hundred even more innocuous nudges to get us there. We could raise $25 billion by winding down the mortgage interest deduction, which disproportionately benefits high-income families and does nothing to promote homeownership. We could find $64.7 billion by increasing the maximum taxable amount of earnings for Social Security so that high- and low-income workers are taxed at the same rate. We could scratch out another $37.3 billion if we treated capital gains and dividends for wealthy Americans the same way we treat income for tax purposes.

Why, for example, wasn’t AIG required to reserve capital against them? Why, for that matter, were Moody’s and Standard & Poor’s willing to bless 80 percent of a pool of dicey mortgage loans with the same triple-A rating they bestowed on the debts of the U.S. Treasury? Why didn’t someone, anyone, inside Goldman Sachs stand up and say, “This is obscene. The rating agencies, the ultimate pricers of all these subprime mortgage loans, clearly do not understand the risk, and their idiocy is creating a recipe for catastrophe”?

unpleasant odor wafting from the subprime mortgage industry that Eisman had detected. These companies disclosed their ever-growing earnings, but not much else. One of the many items they failed to disclose was the delinquency rate of the home loans they were making.

During the 1980s, prudent New Deal rules concerning mortgage loans were repealed, allowing people to get home loans with too little money down and interest rates that would “adjust” to unaffordable heights. So during the 1980s, the average price of a house in America doubled.

When the Goldman Sachs saleswoman called Mike Burry and told him that her firm would be happy to sell him credit default swaps in $100 million chunks, Burry guessed, rightly, that Goldman wasn’t ultimately on the other side of his bets. Goldman would never be so stupid as to make huge naked bets that millions of insolvent Americans would repay their home loans. He didn’t know who, or why, or how much, but he knew that some giant corporate entity with a triple-A rating was out there selling credit default swaps on subprime mortgage bonds. Only a triple-A-rated corporation could assume such risk, no money down, and no questions asked. Burry was right about this, too, but it would be three years before he knew it. The party on the other side of his bet against subprime mortgage bonds was the triple-A-rated insurance company AIG—American International Group, Inc.

What this means is that the entire business model for something like Chase’s credit card business is not much more than a gigantic welfare fraud scheme. These companies borrow hundreds of billions of dollars from the Fed at rock-bottom rates, then turn around and lend it out to the world at 5, 10, 15, 20 percent, as credit cards and mortgages, boat loans and aircraft loans, and so on. If you pay it back, great, it’s a 500 percent or 1,000 percent or 4,000 percent profit for the bank. If you don’t pay it back, the company can put your name in the hopper to be sued. A $5,000 debt on a credit card for the now-defunct Circuit City, which was actually a Chase card, became a $13,000 or $14,000 debt by the time the bank finished applying fees and penalties. Just like a welfare application, you have to read the fine print. “They make more on lawsuits than they make on credit interest,” says Linda.

This is an example of an out-of-sample problem. As easy as it might seem to avoid this sort of problem, the ratings agencies made just this mistake. Moody’s estimated the extent to which mortgage defaults were correlated with one another by building a model from past data—specifically, they looked at American housing data going back to about the 1980s.

Purchase Price $250,000 Down Payment $ 25,000 Mortgage Amount $225,000 At 7% Interest Rate 30 Years $1,349 $485,636 15 Years $1,899 $341,762 Difference $550 $143,874 Five hundred fifty dollars more per month, and you will save almost $150,000 and fifteen years of bondage. The really interesting thing I have observed is that fifteen-year mortgages always pay off in fifteen years. Again, part of a Total Money Makeover is putting in place systems that automate smart moves, which is what a fifteen-year mortgage is. Thirty-year mortgages are for people who enjoy slavery so much they want to extend it for fifteen more years and pay thousands of dollars more for the privilege. If you must take out a mortgage, pretend only fifteen-year mortgages exist. If you have a great interest rate, it is not necessary to refinance to pay a mortgage off in fifteen years or earlier. Simply make payments as if you have a fifteen-year mortgage, and your mortgage will pay off in fifteen years. If you want to pay any mortgage off in twelve years or any number you want, visit my website or get a calculator and calculate the proper payment at your interest rate on your balance for a twelve-year mortgage (or the number you want). Once you have that payment amount, add to your monthly mortgage payment the difference between the new principal and interest payment and your current principal and interest payment, and you will pay off your home in twelve years.

Household was making loans at a faster pace than ever. A big source of its growth had been the second mortgage. The document offered a fifteen-year, fixed-rate loan, but it was bizarrely disguised as a thirty-year loan. It took the stream of payments the homeowner would make to Household over fifteen years, spread it hypothetically over thirty years, and asked: If you were making the same dollar payments over thirty years that you are in fact making over fifteen, what would your “effective rate” of interest be? It was a weird, dishonest sales pitch. The borrower was told he had an “effective interest rate of 7 percent” when he was in fact paying something like 12.5 percent. “It was blatant fraud,” said Eisman. “They were tricking their customers.

How happily we explored our shiny new world! We lived like characters from the great books I curled up with in the big Draylon armchair. Like Jack Kerouak, like Gatsby, we created ourselves as we went along, a raggle-taggle of gypsies in old army overcoats and bell-bottoms, straggling through the fields that surrounded our granite farmhouse in search of firewood, which we dragged home and stacked in the living room. Ignorant and innocent, we acted as if the world belonged to us, as though we would ever have taken the time to hang the regency wallpaper we damaged so casually with half-rotten firewood, or would have known how to hang it straight, or smooth the seams. We broke logs against the massive tiled hearth and piled them against the sooty fire back, like the logs were tradition and we were burning it, like chimney fires could never happen, like the house didn't really belong to the poor divorcee who paid the rates and mortgage even as we sat around the flames like hunter gatherers, smoking Lebanese gold, chanting and playing the drums, dancing to the tortured music of Luke's guitar. Impelled by the rhythm, fortified by poorly digested scraps of Lao Tzu, we got up to dance, regardless of the coffee we knocked over onto the shag carpet. We sopped it up carelessly, or let it sit there as it would; later was time enough. We were committed to the moment. Everything was easy and beautiful if you looked at it right. If someone was angry, we walked down the other side of the street, sorry and amused at their loss of cool. We avoided newspapers and television. They were full of lies, and we knew all the stuff we needed. We spent our government grants on books, dope, acid, jug wine, and cheap food from the supermarket--variegated cheese scraps bundled roughly together, white cabbage and bacon ends, dented tins of tomatoes from the bargain bin. Everything was beautiful, the stars and the sunsets, the mold that someone discovered at the back of the fridge, the cows in the fields that kicked their giddy heels up in the air and fled as we ranged through the Yorkshire woods decked in daisy chains, necklaces made of melon seeds and tie-dye T-shirts whose colors stained the bath tub forever--an eternal reminder of the rainbow generation. [81-82]

default swaps on subprime mortgage bonds. Only a triple-A-rated corporation could assume such risk, no money down, and no questions asked. Burry was right about this, too, but it would be three years before he knew it. The party on the other side of his bet against subprime mortgage bonds was the triple-A-rated insurance company AIG—American International Group, Inc. Or, rather, a unit of AIG called AIG FP. AIG Financial Products was created

These senior claims were supposed to be very low-risk; after all, how likely was it that a large number of people would default on their mortgages at the same time? The answer, of course, is that it was quite likely in an environment where homes were worth 30, 40, 50 percent less than the borrowers originally paid for them. So a lot of supposedly safe assets, assets that had been rated AAA by Standard & Poor's or Moody's, ended up becoming "toxic waste", worth only a fraction of their face value.

why the rating agencies weren’t more critical of bonds underpinned by floating-rate subprime mortgages. Subprime borrowers tended to be one broken refrigerator away from default. Few, if any, should be running the risk of their interest payment spiking up. As most of these loans were structured, however, the homeowner would pay a fixed teaser rate of, say, 8 percent for the first two years, and then, at the start of the third year, the interest rate would skyrocket to, say, 12 percent, and thereafter it would float at permanently high levels.

Most of the crime-ridden minority neighborhoods in New York City, especially areas like East New York, where many of the characters in Eric Garner’s story grew up, had been artificially created by a series of criminal real estate scams. One of the most infamous had involved a company called the Eastern Service Corporation, which in the sixties ran a huge predatory lending operation all over the city, but particularly in Brooklyn. Scam artists like ESC would first clear white residents out of certain neighborhoods with scare campaigns. They’d slip leaflets through mail slots warning of an incoming black plague, with messages like, “Don’t wait until it’s too late!” Investors would then come in and buy their houses at depressed rates. Once this “blockbusting” technique cleared the properties, a company like ESC would bring in a new set of homeowners, often minorities, and often with bad credit and shaky job profiles. They bribed officials in the FHA to approve mortgages for anyone and everyone. Appraisals would be inflated. Loans would be approved for repairs, but repairs would never be done. The typical target homeowner in the con was a black family moving to New York to escape racism in the South. The family would be shown a house in a place like East New York that in reality was only worth about $15,000. But the appraisal would be faked and a loan would be approved for $17,000. The family would move in and instantly find themselves in a house worth $2,000 less than its purchase price, and maybe with faulty toilets, lighting, heat, and (ironically) broken windows besides. Meanwhile, the government-backed loan created by a lender like Eastern Service by then had been sold off to some sucker on the secondary market: a savings bank, a pension fund, or perhaps to Fannie Mae, the government-sponsored mortgage corporation. Before long, the family would default and be foreclosed upon. Investors would swoop in and buy the property at a distressed price one more time. Next, the one-family home would be converted into a three- or four-family rental property, which would of course quickly fall into even greater disrepair. This process created ghettos almost instantly. Racial blockbusting is how East New York went from 90 percent white in 1960 to 80 percent black and Hispanic in 1966.

Back in the 1980s, the original stated purpose of the mortgage-backed bond had been to redistribute the risk associated with home mortgage lending. Home mortgage loans could find their way to the bond market investors willing to pay the most for them. The interest rate paid by the homeowner would thus fall. The goal of the innovation, in short, was to make the financial markets more efficient. Now, somehow, the same innovative spirit was being put to the opposite purpose: to hide the risk by complicating it. The market was paying Goldman Sachs bond traders to make the market less efficient.

Speculators, meanwhile, have seized control of the global economy and the levers of political power. They have weakened and emasculated governments to serve their lust for profit. They have turned the press into courtiers, corrupted the courts, and hollowed out public institutions, including universities. They peddle spurious ideologies—neoliberal economics and globalization—to justify their rapacious looting and greed. They create grotesque financial mechanisms, from usurious interest rates on loans to legalized accounting fraud, to plunge citizens into crippling forms of debt peonage. And they have been stealing staggering sums of public funds, such as the $65 billion of mortgage-backed securities and bonds, many of them toxic, that have been unloaded each month on the Federal Reserve in return for cash.21 They feed like parasites off of the state and the resources of the planet. Speculators at megabanks and investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the weak from the powerful—to steal from everyone, including their own shareholders. They produce nothing. They make nothing. They only manipulate money. They are no different from the detested speculators who were hanged in the seventeenth century, when speculation was a capital offense. The obscenity of their wealth is matched by their utter lack of concern for the growing numbers of the destitute. In early 2014, the world’s 200 richest people made $13.9 billion, in one day, according to Bloomberg’s billionaires index.22 This hoarding of money by the elites, according to the ruling economic model, is supposed to make us all better off, but in fact the opposite happens when wealth is concentrated in the hands of a few individuals and corporations, as economist Thomas Piketty documents in his book Capital in the Twenty-First Century.23 The rest of us have little or no influence over how we are governed, and our wages stagnate or decline. Underemployment and unemployment become chronic. Social services, from welfare to Social Security, are slashed in the name of austerity. Government, in the hands of speculators, is a protection racket for corporations and a small group of oligarchs. And the longer we play by their rules the more impoverished and oppressed we become. Yet, like

It was during the 1970s that statisticians decided it would be a good idea to measure banks’ “productivity” in terms of their risk-taking behavior. The more risk, the bigger their slice of the GDP.14 Hardly any wonder, then, that banks have continually upped their lending, egged on by politicians who have been convinced that the financial sector’s slice is every bit as valuable as the whole manufacturing industry. “If banking had been subtracted from the GDP, rather than added to it,” the Financial Times recently reported, “it is plausible to speculate that the financial crisis would never have happened.”15 The CEO who recklessly hawks mortgages and derivatives to lap up millions in bonuses currently contributes more to the GDP than a school packed with teachers or a factory full of car mechanics. We live in a world where the going rule seems to be that the more vital your occupation (cleaning, nursing, teaching), the lower you rate in the GDP. As the Nobel laureate James Tobin said back in 1984, “We are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity.”16

THIS SCENE WAS REPEATED IN every previously uninhabited nook, elbow, spit, lot, and underpass throughout the foreclosed and abandoned suburbs and exurbs and trailer parks of America, now squatted by the millions who had walked out on mortgages, been foreclosed upon, or simply could no longer afford a fixed address. They were all lumped together by the media into a category called 'subprimes,' a less descriptive label, perhaps, than 'homeless,' but one that in this era of raw, rapacious capitalism gave all the information anyone needed: the credit rating of the men, women, and children who inhabited these Ryanvilles was subprime.

One of the very few media outlets to even consider alternative explanations for the black-white statistical differences was the Atlanta Journal-Constitution, which showed that 52 percent of blacks had credit scores so low that they would qualify only for the less desirable subprime mortgages, as did 16 percent of whites. Accordingly, 49 percent of blacks in the data cited by the Atlanta Journal-Constitution ended up with subprime mortgages, as did 13 percent of whites and 10 percent of Asians.3 In short, the three groups’ respective rankings in terms of the kinds of mortgage loans they could get was similar to their respective rankings in average credit ratings.

The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage.

There was more than one way to think about Mike Burry’s purchase of a billion dollars in credit default swaps. The first was as a simple, even innocent, insurance contract. Burry made his semiannual premium payments and, in return, received protection against the default of a billion dollars’ worth of bonds. He’d either be paid zero, if the triple-B-rated bonds he’d insured proved good, or a billion dollars, if those triple-B-rated bonds went bad. But of course Mike Burry didn’t own any triple-B-rated subprime mortgage bonds, or anything like them. He had no property to “insure” it was as if he had bought fire insurance on some slum with a history of burning down. To him, as to Steve Eisman, a credit default swap wasn’t insurance at all but an outright speculative bet against the market—and this was the second way to think about it.

Well, this was predictable. House Republicans last week acceded to an extension of the Export-Import Bank for at least the next nine months. The Export-Import Bank is far from the worst example of government-business cronyism. I just completed a history of American political corruption and actually had to leave Ex-Im on the cutting room floor. Its cronies are pikers compared with the corporate moguls that take advantage of tax preferences like the G.E. and Apple loopholes. They also cannot hold a candle to the American Medical Association, which is basically free to write the reimbursement rates for Medicare Part B. And nothing compares to Fannie Mae and Freddie Mac from 1991-2008. The two mortgage giants kept the entire D.C. political class bent over a barrel for almost 20 years as its top executives reaped enormous bonuses while putting the broader economy at risk.

It is evident that wealth is even more unevenly distributed than income and that the gap is widening. Since 1976, wealth has increased by 63 percent for the wealthiest 1 percent of the population and by 71 percent for the top 20 percent. Wealth has decreased by 43 percent for the bottom 40 percent of the U.S. population (Economic Policy Institute 2011). The widening gap has multiple causes. First, shifts in the U.S. tax code have lowered the top tax rate from 91 percent in the years from 1950 to 1963, to 35 percent from 2003 to 2012, allowing the wealthy to retain far more of their income (Tax Policy Center 2012). Second, wages for most U.S. families have stagnated since the early 1970s. Moreover, credit card, education, and mortgage debt have skyrocketed. Finally, the collapse of the housing market beginning in 2007 dramatically affected many middleclass families who held a significant portion of their wealth in the value of their home. By 2012, fully 31 percent of all homeowners owed more on their mortgages than their homes were worth (Zillow 2012).

The subprime market tapped a segment of the American public that did not typically have anything to do with Wall Street: the tranche between the fifth and the twenty-ninth percentile in their credit ratings. That is, the lenders were making loans to people who were less creditworthy than 71 percent of the population. Which of these poor Americans were likely to jump which way with their finances? How much did their home prices need to fall for their loans to blow up? Which mortgage originators were the most corrupt? Which Wall Street firms were creating the most dishonest mortgage bonds? What kind of people, in which parts of the country, exhibited the highest degree of financial irresponsibility? The default rate in Georgia was five times higher than that in Florida, even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California, only 5 percent, even though Californians were, on the face of it, far less fiscally responsible. Why? Vinny and Danny flew down to Miami, where they wandered around empty neighborhoods built with subprime loans, and saw with their own eyes how bad things were. “They’d

In this march through a virtual lifetime, we’ve visited school and college, the courts and the workplace, even the voting booth. Along the way, we’ve witnessed the destruction caused by WMDs. Promising efficiency and fairness, they distort higher education, drive up debt, spur mass incarceration, pummel the poor at nearly every juncture, and undermine democracy. It might seem like the logical response is to disarm these weapons, one by one. The problem is that they’re feeding on each other. Poor people are more likely to have bad credit and live in high-crime neighborhoods, surrounded by other poor people. Once the dark universe of WMDs digests that data, it showers them with predatory ads for subprime loans or for-profit schools. It sends more police to arrest them, and when they’re convicted it sentences them to longer terms. This data feeds into other WMDs, which score the same people as high risks or easy targets and proceed to block them from jobs, while jacking up their rates for mortgages, car loans, and every kind of insurance imaginable. This drives their credit rating down further, creating nothing less than a death spiral of modeling. Being poor in a world of WMDs is getting more and more dangerous and expensive.

It was the German powerhouse Deutsche Bank AG, not my fictitious RhineBank, that financed the construction of the extermination camp at Auschwitz and the nearby factory that manufactured Zyklon B pellets. And it was Deutsche Bank that earned millions of Nazi reichsmarks through the Aryanization of Jewish-owned businesses. Deutsche Bank also incurred massive multibillion-dollar fines for helping rogue nations such as Iran and Syria evade US economic sanctions; for manipulating the London interbank lending rate; for selling toxic mortgage-backed securities to unwitting investors; and for laundering untold billions’ worth of tainted Russian assets through its so-called Russian Laundromat. In 2007 and 2008, Deutsche Bank extended an unsecured $1 billion line of credit to VTB Bank, a Kremlin-controlled lender that financed the Russian intelligence services and granted cover jobs to Russian intelligence officers operating abroad. Which meant that Germany’s biggest lender, knowingly or unknowingly, was a silent partner in Vladimir Putin’s war against the West and liberal democracy. Increasingly, that war is being waged by Putin’s wealthy cronies and by privately owned companies like the Wagner Group and the Internet Research Agency, the St. Petersburg troll factory that allegedly meddled in the 2016 US presidential election. The IRA was one of three

The overall U.S. homeownership rate increased from 64 percent in 1994 to a peak in 2004 with an all-time high of 69.2 percent. Real estate had become the leading business in America, more and more speculators invested money in the business. During 2006, 22 percent of homes purchased (1.65 million units) were for investment purposes, with an additional 14 percent (1.07 million units) purchased as vacation homes. These figures led Americans to believe that their economy was indeed booming. And when an economy is booming nobody is really interested in foreign affairs, certainly not in a million dead Iraqis. But then the grave reality dawned on the many struggling, working class Americans and immigrants, who were failing to pay back money they didn't have in the first place. Due to the rise in oil prices and the rise of interest rates, millions of disadvantaged Americans fell behind. By the time they drove back to their newly purchased suburban dream houses, there was not enough money in the kitty to pay the mortgage or elementary needs. Consequently, within a very short time, millions of houses were repossessed. Clearly, there was no one around who could afford to buy those newly repossessed houses. Consequently, the poor people of America became poorer than ever. Just as Wolfowitz's toppled Saddam, who dragged the American Empire down with him, the poor Americans, that were set to facilitate Wolfowitz's war, pulled down American capitalism as well as the American monetary and banking system. Greenspan's policy led an entire class to ruin, leaving America's financial system with a hole that now stands at a trillion dollars.

Between 2003 and 2008, Iceland’s three main banks, Glitnir, Kaupthing and Landsbanki, borrowed over $140 billion, a figure equal to ten times the country’s GDP, dwarfing its central bank’s $2.5 billion reserves. A handful of entrepreneurs, egged on by their then government, embarked on an unprecedented international spending binge, buying everything from Danish department stores to West Ham Football Club, while a sizeable proportion of the rest of the adult population enthusiastically embraced the kind of cockamamie financial strategies usually only mooted in Nigerian spam emails – taking out loans in Japanese Yen, for example, or mortgaging their houses in Swiss francs. One minute the Icelanders were up to their waists in fish guts, the next they they were weighing up the options lists on their new Porsche Cayennes. The tales of un-Nordic excess are legion: Elton John was flown in to sing one song at a birthday party; private jets were booked like they were taxis; people thought nothing of spending £5,000 on bottles of single malt whisky, or £100,000 on hunting weekends in the English countryside. The chief executive of the London arm of Kaupthing hired the Natural History Museum for a party, with Tom Jones providing the entertainment, and, by all accounts, Reykjavik’s actual snow was augmented by a blizzard of the Colombian variety. The collapse of Lehman Brothers in late 2008 exposed Iceland’s debts which, at one point, were said to be around 850 per cent of GDP (compared with the US’s 350 per cent), and set off a chain reaction which resulted in the krona plummeting to almost half its value. By this stage Iceland’s banks were lending money to their own shareholders so that they could buy shares in . . . those very same Icelandic banks. I am no Paul Krugman, but even I can see that this was hardly a sustainable business model. The government didn’t have the money to cover its banks’ debts. It was forced to withdraw the krona from currency markets and accept loans totalling £4 billion from the IMF, and from other countries. Even the little Faroe Islands forked out £33 million, which must have been especially humiliating for the Icelanders. Interest rates peaked at 18 per cent. The stock market dropped 77 per cent; inflation hit 20 per cent; and the krona dropped 80 per cent. Depending who you listen to, the country’s total debt ended up somewhere between £13 billion and £63 billion, or, to put it another way, anything from £38,000 to £210,000 for each and every Icelander.

On Friday, July 11, Americans saw an actual bank run--not a metaphorical run, like the digital withdrawals that had crushed Bear, but a physical run on a physical bank, as in It's a Wonderful Life. That afternoon, the Office of Thrift Supervision and the FDIC shut down and seized IndyMac, a California thrift that was once part of Angelo Mozilo's Countrywide empire. IndyMac had flourished during the bubble by providing exotic mortgages to buyers without much in the way of income or assets. Its balance sheet was loaded with option adjustable-rate mortgages (ARMs), an almost comically irresponsible product that let borrowers choose their monthly payments, adding to their future obligations if they wanted to pay less at the moment.

The Global Financial Crisis of 2007–08 represented the greatest financial downswing of my lifetime, and consequently it presents the best opportunity to observe, reflect and learn. The scene was set for its occurrence by a number of developments. Here’s a partial list: Government policies supported an expansion of home ownership—which by definition meant the inclusion of people who historically couldn’t afford to buy homes—at a time when home prices were soaring; The Fed pushed interest rates down, causing the demand for higher-yielding instruments such as structured/levered mortgage securities to increase; There was a rising trend among banks to make mortgage loans, package them and sell them onward (as opposed to retaining them); Decisions to lend, structure, assign credit ratings and invest were made on the basis of unquestioning extrapolation of low historic mortgage default rates; The above four points resulted in an increased eagerness to extend mortgage loans, with an accompanying decline in lending standards; Novel and untested mortgage backed securities were developed that promised high returns with low risk, something that has great appeal in non-skeptical times; Protective laws and regulations were relaxed, such as the Glass-Steagall Act (which prohibited the creation of financial conglomerates), the uptick rule (which prevented traders who had bet against stocks from forcing them down through non-stop short selling), and the rules that limited banks’ leverage, permitting it to nearly triple; Finally, the media ran articles stating that risk had been eliminated by the combination of: the adroit Fed, which could be counted on to inject stimulus whenever economic sluggishness developed, confidence that the excess liquidity flowing to China for its exports and to oil producers would never fail to be recycled back into our markets, buoying asset prices, and the new Wall Street innovations, which “sliced and diced” risk so finely, spread it so widely and placed it with those best suited to bear it.

The seeds of disaster had been planted years earlier with such measures as: the deregulation of the banks in the late 1990s; the push to increase home ownership, which encouraged lax mortgage standards; historically low interest rates, which created a liquidity bubble; and the system of Wall Street compensation that rewarded short-term risk taking. They all came together to create the perfect storm.

Cash Flow & Loan Paydown Let’s talk briefly on how mortgages work. A mortgage is just a fancy word for “loan on a property.” An owner-occupied mortgage is that same loan, but requires you to live there for a more favorable price or terms. With house hacking, you are likely going to obtain an owner-occupied loan. For the purposes of this discussion, let’s say that you are getting a 3.5 percent FHA loan. If you purchase a property for $100,000, you will be responsible for putting $3,500 down in exchange for a $96,500 loan to be paid back monthly over the next thirty years. Assuming a 5.25 percent interest rate, the monthly payments would be $532.88 per month. Each monthly payment will be a combination of principal and interest. The principal is the actual balance of the loan the bank gives you—in this case $96,500. The interest payment is the amount that you are paying the bank for lending you money. In the first month, the concentration of interest payment will be highest, and as you continue to pay down the mortgage every month, an increasing amount of that $532.88 payment will be applied toward the principal. Take a look at the amortization schedule below to see how each payment over the next twelve months is comprised. Do you see how the interest portion of the payment decreased over time, but the amount applied to the principal increases? When you are paying down your principal, you are building equity in the property by paying back the balance of the loan. The best part about house hacking is that you are not actually paying the loan: Your tenants are! Not only are you living for free, and maybe even cash flowing, you own more and more of your house each month.

left school without knowing what capitalism was, much less a mortgage, interest rates, central banking, fiat currency or quantitative easing. The word imperialism had never been used in the classroom, much less ‘class struggle’. What history I did learn can be seen as little more than aristocratic nationalist propaganda; Henry VIII and his marital dramas; how Britain and America defeated the Nazis – minus the Commonwealth and with a very vague mention of the Soviet contribution; how Britain had basically invented democracy and all that was good and wonderful.

what gets defined as crime, and who gets surveilled and punished, generally has more to do with the politics of race and class than the harm that any particular behavior or activity causes. As Alec Karakatsanis observes in Usual Cruelty: The Complicity of Lawyers in the Criminal Injustice System, people with race and class privilege are generally shielded from criminal prosecution, even though their crimes often cause far greater harm than the crimes of the poor. The most obvious example is the prosecutorial response to the financial crisis of 2008 and the related scandals: “Employees at banks committed crimes including lying to investigators and regulators, fraudulently portraying junk assets as valuable assets, rate-rigging, bribing foreign officials, submitting false documents, mortgage fraud, fraudulent home foreclosures, financing drug cartels, orchestrating and enabling widespread tax evasion, and violating international sanctions.” The massive criminality caused enormous harm. African Americans lost over half their wealth due to the collapse of real estate markets and the financial crisis. By the end of the crisis, in 2009, median household wealth for all Americans had declined by $27,000, leaving almost 44 million people in poverty. While some banks were eventually prosecuted (and agreed to pay fines that were a small fraction of their profits), the individuals who committed these crimes were typically spared. Despite engaging in forms of criminality that destroyed the lives and wealth of millions, they were not rounded up, dragged away in handcuffs, placed in cages, and then stripped of their basic civil and human rights or shipped to another country. Their mug shots never appeared on the evening news and they never had to wave goodbye to their children in a courtroom, unable to give them a final embrace.

MBS face all of the regular risks (changing interest rates, for example) linked to bonds and other fixed-income securities, and two that are unique to them. These special risks are tied to the underlying mortgages: homeowners could default (stop making payments, substantially more likely with private-label MBS) or pay off their loans early, either of which would affect investor yield and cash flows.

If you owned the house for one year or less, gains get taxed at ordinary rates (which range as high as 37 percent). If you’ve held the asset for more than a year, capital gains rates kick in (0 percent, 15 percent, or 20 percent depending on your overall income level).

flipping business counts as a business for tax purposes (even if you’re just doing it as a side gig). All of your profits will be taxed at ordinary rates and be subject to self-employment taxes.

Colonial Policy and Practice: A Comparative Study of Burma and Netherlands India by J. S. Furnivall Quoting page 85-87: Lower Burma when first occupied … was a vast deltaic plain of swamp and jungle, with a secure rainfall; when the opening of the canal created a market for rice, this wide expanse of land was rapidly reclaimed by small cultivators … Formerly, the villager in Lower Burma, like peasants in general, cultivated primarily for home consumption, and it has always been the express policy of the Government to encourage peasant proprietorship. Land in the delta was abundant … The opening of the canal provided a certain and profitable market for as much rice as people could grow. … men from Upper Burma crowded down to join in the scramble for land. In two or three years a labourer could save out of his wages enough money to buy cattle and make a start on a modest scale as a landowner. … The land had to be cleared rapidly and hired labour was needed to fell the heavy jungle. In these circumstances newly reclaimed land did not pay the cost of cultivation, and there was a general demand for capital. Burmans, however, lacked the necessary funds, and had no access to capital. They did not know English or English banking methods, and English bankers knew nothing of Burmans or cultivation. … in the ports there were Indian moneylenders of the chettyar caste, amply provided with capital and long accustomed to dealing with European banks in India. About 1880 they began to send out agents into the villages, and supplied the people with all the necessary capital, usually at reasonable rates and, with some qualifications, on sound business principles. … now the chettyars readily supplied the cultivators with all the money that they needed, and with more than all they needed. On business principles the money lender preferred large transactions, and would advance not merely what the cultivator might require but as much as the security would stand. Naturally, the cultivator took all that he could get, and spent the surplus on imported goods. The working of economic forces pressed money on the cultivator; to his own discomfiture, but to the profit of the moneylenders, of European exporters who could ensure supplies by giving out advances, of European importers whose cotton goods and other wares the cultivator could purchase with the surplus of his borrowings, and of the banks which financed the whole economic structure. But at the first reverse, with any failure of the crop, the death of cattle, the illness of the cultivator, or a fall of prices, due either to fluctuations in world prices or to manipulation of the market by the merchants, the cultivator was sold up, and the land passed to the moneylender, who found some other thrifty labourer to take it, leaving part of the purchase price on mortgage, and with two or three years the process was repeated. … As time went on, the purchasers came more and more to be men who looked to making a livelihood from rent, or who wished to make certain of supplies of paddy for their business. … Others also, merchants and shopkeepers, bought land, because they had no other investment for their profits. These trading classes were mainly townsfolk, and for the most part Indians or Chinese. Thus, there was a steady growth of absentee ownership, with the land passing into the hands of foreigners. Usually, however, as soon as one cultivator went bankrupt, his land was taken over by another cultivator, who in turn lost with two or three years his land and cattle and all that he had saved. [By the 1930s] it appeared that practically half the land in Lower Burma was owned by absentees, and in the chief rice-producing districts from two-thirds to nearly three-quarters. … The policy of conserving a peasant proprietary was of no avail against the hard reality of economic forces…

When something in society goes so wrong, that something is often a product of one very large agreement instead of the various small disagreements that consume the political sphere. Looming over the fights about which administration is to blame for housing becoming so unstable and what percentage increase this or that program is entitled to sits the inconsistency of America spending about $70 billion a year subsidizing homeownership through tax breaks like deferred taxes on capital gains and the mortgage interest deduction (MID), which allows homeowners to deduct the interest on their home loan from their federal income taxes. Together these tax breaks amount to a vast upper-middle-class welfare program that encourages people to buy bigger and more expensive houses, but because their biggest beneficiaries are residents of high-cost cities in deep blue redoubts like New York and California, even otherwise liberal politicians fight any attempt to reduce them. These programs are also entitlements that live on budgetary autopilot, meaning people get the tax breaks no matter how much they cost the government. Contrast that with programs like Section 8 rental vouchers, which cost about $20 billion a year, have been shown to be highly effective at reducing homelessness, and cost far less than the morally repugnant alternative of letting people live in tents and rot on sidewalks, consuming police resources and using the emergency room as a public hospital. That program has to be continually re-upped by Congress, and unlike middle-class homeowner programs, when the money runs out, it’s gone. This is why many big cities either have decades-long lines for rental vouchers or have closed those lines indefinitely on account of excess demand. The message of this dichotomy, which has persisted for decades regardless of which party is in charge and despite the mountains of evidence showing just how well these vouchers work, is that America is willing to subsidize as much debt as homeowners can gorge themselves on but that poor renters, the majority of whom live in market-rate apartments, are a penny-ante side issue unworthy of being prioritized.

If you have a traditional fixed-rate mortgage, all you have to do is make early principal payments over the life of the loan. Prepay your next month’s principal, and you could pay off a 30-year mortgage in 15 years in many cases! Does that mean double your monthly payments? No, not even close! Here’s the key: Money Power Principle 3. Cut your mortgage payments in half! The next time you write your monthly mortgage check, write a second check for the principal-only portion of next month’s payment. It’s money you’ll have to pay anyway the following month, so why not take it out of your pocket a couple of weeks early and enjoy some serious savings down the road? Fully 80% to 90%, and in some cases even more, of your early payments will be interest expense anyway. And on average, most Americans either move or refinance within five to seven years (and then start the insanity all over again with a new home mortgage). “It’s a pity,” mortgage expert Marc Eisenson, author of The Banker’s Secret, told the New York Times. “There are millions of people out there who faithfully make their regular mortgage payments because they don’t understand . . . the benefits of pocket-change prepayments.

Whenever you sell a capital asset for a gain or loss, that sale gets reported on Schedule D. The gains and losses are sorted based on timing: short-term for assets held for one year or less and long-term for assets held longer than one year. That timing matters because gains on short-term holdings are taxed at ordinary rates rather than the more favorable capital gains tax rates (0 percent, 15 percent, or 20 percent depending on your income). Capital gains can be used to offset capital losses, and you only have to pay tax on your overall net capital gains. If you end up with a net capital loss, you can deduct up to $3,000 of it against your other income; the rest gets carried forward to the next year.

As an investor, you pay lower capital gains taxes on any property sale profits. As a dealer, you pay higher ordinary income tax rates plus self-employment taxes (Social Security and Medicare). If you do get stuck in this dealer category, you’ll probably be eligible for the 20 percent deduction, so check with your tax preparer.

The most common certifications include: • LEED (Leadership in Energy and Environmental Design), an internationally recognized green building rating and certification system • HERS (Home Energy Rating System), a nationally recognized rater of a building’s energy efficiency • Energy Star, a US government-backed symbol for energy-efficient products

Banks generally avoid issuing small-dollar mortgages, not because they’re riskier—these mortgages have the same delinquency rates as larger mortgages—but because they’re less profitable

A 2021 study found that middle-class Black homeowners (with incomes between $75,000 and $100,000) carried higher interest rates on their mortgages than white homeowners with incomes at or below $30,000.

In 2009, an American soldier named Bowe Bergdahl slipped through a gap in the concertina wire at his combat outpost in southern Afghanistan and walked off into the night. He was quickly captured by a Taliban patrol, and his absence triggered a massive search by the US military that put thousands of his fellow soldiers at risk. The level of betrayal felt by soldiers was so extreme that many called for Bergdahl to be tried for treason when he was repatriated five years later. Technically his crime was not treason, so the US military charged him with desertion of his post—a violation that still carries a maximum penalty of death. The collective outrage at Sergeant Bergdahl was based on very limited knowledge but provides a perfect example of the kind of tribal ethos that every group—or country—deploys in order to remain unified and committed to itself. If anything, though, the outrage in the United States may not be broad enough. Bergdahl put a huge number of people at risk and may have caused the deaths of up to six soldiers. But in purely objective terms, he caused his country far less harm than the financial collapse of 2008, when bankers gambled trillions of dollars of taxpayer money on blatantly fraudulent mortgages. These crimes were committed while hundreds of thousands of Americans were fighting and dying in wars overseas. Almost 9 million people lost their jobs during the financial crisis, 5 million families lost their homes, and the unemployment rate doubled to around 10 percent. For nearly a century, the national suicide rate has almost exactly mirrored the unemployment rate, and after the financial collapse, America’s suicide rate increased by nearly 5 percent. In an article published in 2012 in The Lancet, epidemiologists who study suicide estimated that the recession cost almost 5,000 additional American lives during the first two years—disproportionately among middle-aged white men. That is close to the nation’s losses in the Iraq and Afghan wars combined. If Sergeant Bergdahl betrayed his country—and that’s not a hard case to make—surely the bankers and traders who caused the financial collapse did as well. And yet they didn’t provoke nearly the kind of outcry that Bergdahl did. Not a single high-level CEO has even been charged in connection with the financial collapse, much less been convicted and sent to prison, and most of them went on to receive huge year-end bonuses. Joseph Cassano of AIG Financial Products—known as “Mr. Credit-Default Swap”—led a unit that required a $99 billion bailout while simultaneously distributing $1.5 billion in year-end bonuses to his employees—including $34 million to himself. Robert Rubin of Citibank received a $10 million bonus in 2008 while serving on the board of directors of a company that required $63 billion in federal funds to keep from failing. Lower down the pay scale, more than 5,000 Wall Street traders received bonuses of $1 million or more despite working for nine of the financial firms that received the most bailout money from the US goverment.

The wealth effect is one pillar supporting the Fed’s zero-interest-rate policy and profligate money printing since 2008. The transmission channels are easy to follow. If rates are low, more Americans can afford mortgages, which increases home buying, resulting in higher prices for homes. Similarly, with low rates, brokers offer cheap margin loans to clients, which result in more stock buying and higher stock prices.

If you sell someone a prime-rate, 5 percent annual percentage rate (APR) thirty-year mortgage in the amount of $200,000, they’ll pay you back an additional $186,512—93 percent of what they borrowed—for the privilege of spreading payments out over thirty years. If you can manage to sell that same person a subprime loan with a 9 percent interest rate, you can collect $379,328 on top of the $200,000 repayment, nearly twice over what they borrowed. The public policy justification for allowing subprime loans was that they made the American Dream of homeownership possible for people who did not meet the credit standards to get a cheaper prime mortgage. But the subprime loans we started to see in the early 2000s were primarily marketed to existing homeowners, not people looking to buy—and they usually left the borrower worse off than before the loan. Instead of getting striving people into homeownership, the loans often wound up pushing existing homeowners out. The refinance loans stripped homeowners of equity they had built up over years of mortgage payments. That’s why these diseased loans were tested first on the segment of Americans least respected by the financial sector and least protected by lawmakers: Black and brown families.

The treacherous practice of pushing subprime mortgages onto working class and poor people in no way represents a departure for banks… and they have gotten away with imposing the highest interest rates on workers, the poor, and people of color… thus subprime mortgages have joined overdraft fees, high-interest rate credit cards complete with astronomical fees and penalties, and payday loans in a long list of predatory products, which are designed to sap income from the poor… as anti-apartheid activist Steve Biko once remarked, “It is very expensive to be poor.

Unfortunately, the Bull that gilded Renaissance New York did little for most Americans. Eighties Wall Street was about institutional money released by deregulation, mergers and acquisitions, and, most of all, the debt that made it all possible. As John Kenneth Galbraith points out, financial euphoria always starts with new ways to borrow money; this time it was triggered by the Savings & Loan crisis. Volcker’s rocketing interest rates had forced S&Ls to offer double digits to new depositors while only getting back single digits on the old thirty-year mortgages on their books. S&Ls were going under, and getting a mortgage was nearly impossible, so in March 1980, with the banking system and the housing market on the brink, Carter had signed a law to allow them to issue credit cards, invest in commercial real estate, and offer checking accounts in order to stay in business. Reagan then took it a step further with a change that encouraged S&Ls to sell their mortgages in search of higher returns, freeing up a $1 trillion that needed to be invested in something. Which takes us back to Salomon Brothers, where in 1978 one Lew Ranieri had repackaged an old investment product the government had clamped down on during the Depression: A group of home mortgages all backed by government insurance would be bundled together, then sliced into bonds, thus converting the debt some people owed on their homes into an asset for others. Ranieri had been a bit ahead of the curve then—the same high interest rates that killed the S&Ls also made his bonds unattractive—but now deregulation let Salomon buy up the S&Ls’ mortgages at a deep discount, bundle them into bonds, and sell them back to the S&Ls who believed they’d diversified into the bond market when in fact they’d just bought ground meat made out of their own steaks. In June 1983, Salomon Brothers and Freddie Mac together issued the first collateralized mortgage obligation bonds (CMOs), which bundled up debt and cut it into tranches based on the amount of risk: you could choose between ground chuck and ground sirloin. It would be years before technology would allow doing this on a huge scale, but the immediate impact was that all kinds of debt, not just mortgages, were bundled, cut into bonds, and sold: credit card debt, car loans, you name it. Between 1983 and 1988, some $60 billion of CMOs were sold; GM’s financing arm became more profitable than its cars. America began to make debt instead of things. The

Investment firms are buying up more vacation homes, aiming to cash in on growing demand from tourists and remote workers. Most vacation rental homes are owned by small-time owners who list their properties on websites such as Airbnb Inc., but the number of financial firms investing in the sector is growing. New York-based investment firm Saluda Grade is launching a venture with short-term- rental operator AvantStay Inc. to buy about $500 million of homes, the companies said Tuesday. Saluda Grade said it is also looking to raise debt by selling mortgage bonds backed by its homes to investors, the first vacation-rental mortgage securitization, according to the company. Andes STR, a startup that buys and manages short-term rental homes on behalf of investors, also recently signed a deal with Chilean investment firm WEG Capital to buy roughly $80 million of properties in the U.S., Andes said. These investors are betting they can get higher returns if they rent out homes by the night instead of by the year. Low-interest rates have made it more attractive to borrow and Buy Traditional Rental Homes, inflating property prices and making it harder for new buyers to turn a profit. That has prompted some institutions and wealthy families to look in more obscure corners of the property market where competition is smaller, investment advisers say. Some are turning to investments in vacation homes, where demand has surged in many places during the pandemic as more people choose to work from remote locations and leisure travel heated up last year. “There’s a lot more yield available in the short-term market,” said Saluda Grade’s chief executive, Ryan Craft. It is the latest sign of how the pandemic is changing the way people work and live, and how real-estate investors are angling to find new ways to profit from these shifts. Saluda Grade is targeting homes within driving distance of major population centers, Mr. Craft said. His company will buy the homes and AvantStay will manage them for a fee. But while vacation-rental homes can offer higher returns, they also pose challenges to investors. Mortgages are usually more expensive and harder to get for short-term rentals than for owner-occupied homes, said Giri Devanur, CEO of reAlpha Tech Corp., a startup that wants to pool money from small-time investors to buy short-term-rental homes.

What if some man wanted to tell me how many feet from a dwelling a cesspool needed to be? What if he wanted to talk about the pros and cons of raising the mortgage rate? What if he wanted to talk about his childhood? Or worse, mine!

Eager to get in on the action, friends, cabdrivers, and schoolteachers told me they’d started flipping houses, everyone suddenly fluent in the language of balloon payments, adjustable-rate mortgages, and the Case-Shiller Index. If I cautioned them gently—real estate can be unpredictable, you don’t want to get in too deep—they’d assure me they had talked to their cousin or uncle who had made a killing, in a tone of mild amusement that implied I didn’t know the score.

What are you trying to buy? Asset type? Size? Price? To determine the answer to the first question, do the following: Start with your own net worth. Add in friends and family. The total team net worth is your starting point. Choose a market. Consider travel time and expense. You must be able to be in your market to look at deals at least once a month. Determine the viability of your market. Job growth? Population growth? Get deal flow from the market. Real estate agents Find all commercial realty companies in the city. Get on all their mailing lists. Analyze deals online from realtors in the area. Call the realtors about their listings. Direct to owners Get lists of owners. Create a system to reach owners directly. Mail Text Cold calling Analyze deals. Income approach Income – Expenses = Net operating income Net operating income – Debt service = Cash flow Check with lenders for current terms on debt. What is the CoC return? Cap rate? Debt ratio? Comparable data Check the analyzed cap rate against cap rates in the area for similar properties. Check comparable sale prices. Comps should be close in size and age to the subject property. Comps should have similar amenities. Comps should be within a few miles of the subject property. Exit Hold and operate. Refinance. Sell or flip. Consider upcoming market conditions. Debt Check with lenders or a mortgage broker to determine the availability of loans for this type of property. What are the terms and conditions? Is this the information you used to analyze the deal originally? Make the offer. Use an LOI to submit the offer in writing. The LOI will summarize the main deal points. If your offer is less than 15 percent of the asking price, speak with the realtor before you submit the offer. Once the offer is accepted, send the LOI to your attorney and have them draft the purchase agreement. Draft the purchase and sale agreement. Now that you have a fully executed contract, the clock starts. Earnest money goes into escrow. Do your due diligence. Financial inspection Physical inspection Lease audit Begin your loan application. The lender will complete three inspections. Appraisal Environmental inspection Physical engineer inspection of the buildings Do your closing. The lender will wire the loan proceeds to the closing escrow. Wire your down payment funds to the closing escrow. You own a new property! Engage property management for takeover of operations.

than 5% of Black children currently reside in census tracts with a low poverty rate (below 10%) and fathers present in more than half of homes. In contrast, 62.5% of White children live in low-poverty areas with fathers living in more than half of children’s homes. Here we can see the contemporary legacy of racial neighborhood segregation in the US, which was cemented by decades of the discriminatory and harmful practice of “redlining” in US mortgage and housing markets.

fewer than 5% of Black children currently reside in census tracts with a low poverty rate (below 10%) and fathers present in more than half of homes. In contrast, 62.5% of White children live in low-poverty areas with fathers living in more than half of children’s homes. Here we can see the contemporary legacy of racial neighborhood segregation in the US, which was cemented by decades of the discriminatory and harmful practice of “redlining” in US mortgage and housing markets.

Trillions of dollars in homeowner equity…so are the best “captains” of “equity conversion airplanes” the homeowners themselves? No. There is an impetus placed upon real estate professionals - as well as an implied responsibility - to honestly, to effectively and to accurately communicate reality to home sellers. An inability to do so? Fewer real estate listings. Lower sale prices for home sellers. Less equity converted into cash for home sellers. Less revenue for real estate companies. Inopportune…across the board. Three years ago, American homeowners were custodians of an estimated $19 trillion in homeowner equity. Furthermore, over the past three years - even with these stubbornly-elevated mortgage rates - we witnessed an uninterrupted, further run-up in home prices. More equity gained, for American homeowners. As mortgage rates ease downwards heading into the fall, unlocking trillions of dollars in homeowner equity - as a result of more homeowners deciding to either trade up to larger homes, or to downsize to smaller homes, circumstances permitting - will trigger a large-scale (and an upcoming) re-thinking of this following question by more and more homeowners: What shall we now do with this equity we have in our home? So what’s the plan? In real estate, the effective utilization of well-tested "tools,” such as 3-D tours and virtual staging, coupled to good marketing processes - I.e.: a Marketing Plan - deployed by successful real estate teams is a great way for homeowners to convert the equity they have in their homes into cash. It works. Ok, so if you are a for sale by owner home seller in 2024, data indicate that an over-reliance in - as well as, maybe, blind faith placed upon(?), “the Internet,” if you decide to sell your home yourself, FSBO, could lead to an entirely avoidable (and a costly) home selling misadventure. As well as to a saddened foray for home sellers into this unintended outcome: lower sale prices.

As monthly mortgage payments rose for home buyers over the past several years as a result of higher mortgage rates (coupled to increasing home prices), what simultaneously so too did rise were earned income opportunities for bondholders. Bondholders benefitted…at the expense of home buyers. If the Fed does indeed enact two rate cuts through the end of 2024, mortgage rates are likely to drop. As too will yields bondholders attain, through their purchase of newly-issued 10-year Treasuries. A trade-off is in the making. A much-welcomed rebalancing.

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These Ginnie Maes suck. They get longer [in maturity] when rates go up, and shorter when rates go down, and nobody wants them

Then again, what Cosimo had said was right: he was nothing but an overworked drone in a cube farm, a minor cog in the dreary machinery of a third-rate mortgage mill, overlooked, unloved, a sidelined player in the big game,

Mortgages were short-term, usually for three to five years, and they were not amortized. In other words, people paid interest, but did not repay the sum they had borrowed (the principal) until the end of the loan’s term, so that they ended up facing a balloon-sized final payment. The average difference (spread) between mortgage rates and high-grade corporate bond yields was about two percentage points during the 1920s, compared with about half a per cent (50 basis points) in the past twenty years.

Two years later, to provide some competition in the secondary market, the Federal Home Loan Mortgage Corporation (Freddie Mac) was set up. The effect was once again to broaden the secondary market for mortgages, and in theory at least to lower mortgage rates.

The S&Ls were simultaneously losing money on long-term fixed-rate mortgages, because of inflation, and haemorrhaging deposits to higher-interest money market funds.

then resold their loans in bulk to Wall Street banks. The banks, in turn, bundled the loans into high-yielding residential mortgage-backed securities (RMBS) and sold them on to investors around the world, all eager for a few hundredths of a percentage point more return on their capital. Repackaged as collateralized debt obligations (CDOs), these subprime securities could be transformed from risky loans to flaky borrowers into triple-A rated investment-grade securities.

But now I also understand, firsthand, the meaning of what the caregivers who work in that system do every day. They do achieve amazing things, and when it’s your life or your child’s life or your mother’s life on the receiving end of those amazing things, there is no such thing as a runaway cost. You’ll pay anything, and if you don’t have the money, you’ll borrow at any mortgage rate or from any payday lender to come up with the cash. Which is why 60 percent of the nearly one million personal bankruptcies filed in the United States last year resulted from medical bills.

Many banks do not advertise they are portfolio lenders and many people working at the bank may not even know what a portfolio lender is. If you are calling up a bank and they say they aren’t a portfolio lender, don’t give up! Ask to talk to a loan officer and ask specific questions about what type of investor programs they offer. Here are some good questions to ask; Do you loan to investors who already have four mortgages? Do you sell your loans or keep them in-house? Do you allow investors with four or more mortgages to do cash out refinance? What terms and loan programs do you offer investors? ARM, 15, 30 year fixed, balloon? What interest rates are you charging and what are the initial costs for your loans? What

The state arbitrarily set the mortgage interest rate at 8.5 percent—below the prime rate of 9 or so percent—so banks could make more money out of state. The bottom line for financial institutions is profit.

WaMu’s patchwork of systems for making mortgage loans did not help. A homeowner would lock in a low interest rate through

These newly minted right-wingers were rattling off old Birch slogans: Immigrants are the enemy. Protect our borders and deport all illegal aliens. Gays are ungodly. Pray the gay away from children and teens. Unemployed people don’t want to work, and poor people keep themselves poor, on purpose. If we cut the minimum wage and eliminate unemployment compensation, everyone will have a job. Unions caused the economic collapse by shielding lazy, incompetent public employees. Rich folks are “job creators,” and we need to protect their wealth. Social Security is unsustainable, and Medicare and Medicaid have to be restricted so that corporations and “job creators” have lower tax rates. Abortion is murder and must be outlawed even in cases of rape and incest. No exception means no exceptions; even in cases where the mother’s life is in danger. The economic meltdown of 2008 came from high taxes on corporations, too many regulations, and poor people taking out mortgages they couldn’t afford. The government can’t create jobs, so stimulus programs don’t work. Cutting taxes creates jobs. The government can’t limit the right to own or carry guns. If guns are outlawed, only outlaws will have guns. America is God’s chosen nation, but our president can’t understand our exceptionalism. After all, he’s not a “real” American; he’s a Marxist, Socialist, Muslim racist who hates America.

Net wages: “It’s not what you make, but what you net” after paying the FIRE sector, basic utilities and taxes. The usual measure of disposable personal income (DPI) refers to how much employees take home after income-tax withholding (designed in part by Milton Friedman during World War II) and over 15% for FICA (Federal Insurance Contributions Act) to produce a budget surplus for Social Security and health care (half of which are paid by the employer). This forced saving is lent to the U.S. Treasury, enabling it to cut taxes on the higher income brackets. Also deducted from paychecks may be employee withholding for private health insurance and pensions. What is left is by no means freely available for discretionary spending. Wage earners have to pay a monthly financial and real estate “nut” off the top, headed by mortgage debt or rent to the landlord, plus credit card debt, student loans and other bank loans. Electricity, gas and phone bills must be paid, often by automatic bank transfer – and usually cable TV and Internet service as well. If these utility bills are not paid, banks increase the interest rate owed on credit card debt (typically to 29%). Not much is left to spend on goods and services after paying the FIRE sector and basic monopolies, so it is no wonder that markets are shrinking. (See Hudson Bubble Model later in this book.) A similar set of subtrahends occurs with net corporate cash flow (see ebitda). After paying interest and dividends – and using about half their revenue for stock buybacks – not much is left for capital investment in new plant and equipment, research or development to expand production.

The Fed’s fingerprints were all over this boom, and not just because of Greenspan’s low interest rates. In 1993, in response to initiatives by the Clinton administration to make housing more affordable for minorities and the poor, the Boston Fed produced a widely circulated paper called “Closing the Gap: A Guide to Equal Opportunity Lending.” “Lack of credit history should not be seen as a negative factor” in obtaining a mortgage, the Boston Fed guide noted. As an effort to counter “unintentional” racism in lending markets, the guide sanctioned lowering traditional mortgage-lending standards. Not enough saved for a down payment? No problem. The Boston Fed’s PhDs encouraged banks to allow loans from nonprofits or government assistance agencies to go toward a borrower’s down payment, though such borrowers are more likely to default on their mortgages. The Boston Fed distributed more than ninety thousand copies of this remarkably naïve guide. The mortgage industry, anxious to extend its reach and generate fees, embraced its suggestions.

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The basic task performed by the credit rating agencies was to strip derivatives of their individuality. Whether it was David Bowie pioneering securities derived from the perpetual value his music had created or a 30-year conventional mortgage, once a credit rating had been assigned, investors were agnostic. Bowie’s AAA-rated royalties and the AAA mortgage on the house next door were interchangeable, or as Gorton said, “informationally insensitive.

Mortgages 18-month low for loan rates The average rate for a 30-year fixed mortgage fell this week to 3.89 percent, an 18-month low, from 3.97 percent last week, according to Freddie Mac’s survey of lenders. The average for a 15-year fixed-rate home loan fell to 3.1 percent from 3.17 percent. Initial rates for adjustable mortgages also eased, Freddie Mac said Thursday in its widely watched weekly report. Freddie Mac chief economist Frank Nothaft said “underwhelming” economic news was a factor in depressing rates. Home sales and job growth have been weaker than expected, he said.

The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage.

The Fed is still on the same track.” Whatever you call it, the benign economic environment has supported a bull market since 2009, and though there were a few rocky days last week, the main market ingredients seemed to remain in place. For example, on Wednesday a government report on gross domestic product in the second quarter showed that the economy was growing smartly, even rapidly, at a 4 percent annualized rate; yet the Federal Reserve declared that inflation was low enough to allow the slowly moderating pace of its expansive monetary policy to remain on track. In a statement on Wednesday, the Federal Open Market Committee said the central bank would continue to ratchet down its bond purchases as planned, yet it also said its policies would “maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.” The Fed already holds more than $4 trillion in bonds, up from less than $1 billion when the financial crisis started, and it’s still buying more.

Where to find the borrowers with high FICO scores? Here the Wall Street bond trading desks exploited another blind spot in the rating agencies’ models. Apparently the agencies didn’t grasp the difference between a “thin-file” FICO score and a “thick-file” FICO score. A thin-file FICO score implied, as it sounds, a short credit history. The file was thin because the borrower hadn’t done much borrowing. Immigrants who had never failed to repay a debt, because they had never been given a loan, often had surprisingly high thin-file FICO scores. Thus a Jamaican baby nurse or Mexican strawberry picker with an income of $14,000 looking to borrow three-quarters of a million dollars, when filtered through the models at Moody’s and S&P, became suddenly more useful, from a credit-rigging point of view. They might actually improve the perceived quality of the pool of loans and increase the percentage that could be declared triple-A. The Mexican harvested strawberries; Wall Street harvested his FICO score.

The financial crisis of 2008 is illustrated by the following analogy. There is no doubt that the improvements in engineering have made the passenger car safer than it was 50 years ago. But that does not mean that the automobile is safe at any speed. A small bump on the road can flip the most advanced passenger car speeding 120 mph today just as surely as an older model traveling 80 mph. During the Great Moderation, risks were indeed lower, and financial firms rationally leveraged their balance sheets in response. But their leverage became too great, and all that was needed was an unexpected increase in the default rate on subprime mortgages—that “bump on the road”—to catapult the economy into a crisis.

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In response to current events, people often reach for historical analogies, and this occasion was no exception. The trick is to choose the right analogy. In August 2007, the analogies that came to mind—both inside and outside the Fed—were October 1987, when the Dow Jones industrial average had plummeted nearly 23 percent in a single day, and August 1998, when the Dow had fallen 11.5 percent over three days after Russia defaulted on its foreign debts. With help from the Fed, markets had rebounded each time with little evident damage to the economy. Not everyone viewed these interventions as successful, though. In fact, some viewed the Fed’s actions in the fall of 1998—three quarter-point reductions in the federal funds rate—as an overreaction that helped fuel the growing dot-com bubble. Others derided what they perceived to be a tendency of the Fed to respond too strongly to price declines in stocks and other financial assets, which they dubbed the “Greenspan put.” (A put is an options contract that protects the buyer against loss if the price of a stock or other security declines.) Newspaper opinion columns in August 2007 were rife with speculation that Helicopter Ben would provide a similar put soon. In arguing against Fed intervention, many commentators asserted that investors had grown complacent and needed to be taught a lesson. The cure to the current mess, this line of thinking went, was a repricing of risk, meaning a painful reduction in asset prices—from stocks to bonds to mortgage-linked securities. “Credit panics are never pretty, but their virtue is that they restore some fear and humility to the marketplace,” the Wall Street Journal had editorialized, in arguing for no rate cut at the August 7 FOMC meeting.

In retrospect, I think our view of market expectations was too dependent on our survey of securities dealers. Futures markets gave us a reliable read of where markets thought the federal funds rate was going—but not for our securities purchases. For that, economists at the New York Fed asked their counterparts at the securities firms, who paid careful attention to every nuance of Fed policymakers’ public statements. In effect, our PhD economists surveyed their PhD economists. It was a little like looking in a mirror. It didn’t tell us what the rank-and-file traders were thinking. Many traders, apparently, didn’t pay much attention to their economists and were betting our purchases would continue more or less indefinitely. Some called it “QE-ternity” or “QE-infinity.” Their assumption was unreasonable and entirely inconsistent with what we had been saying. Nevertheless, some investors had evidently established market positions based on it. Now, like Metternich, they looked at our statements about securities purchases and asked, “What do they mean by that?” Their conclusion, despite the plain meaning of what I said at the press conference, was that we were signaling an earlier increase in our federal funds rate target. They sold their Treasury securities and mortgage-backed securities, driving up long-term interest rates.

Why do we need long-term fixed-rate mortgages in a world where the work force of the future is going to change jobs and move every three to five years?

Sharecropping is the dirty little secret at the root of America’s wealth—along with slavery itself. The immense profits generated by the industrious yet impoverished Black “sharecroppers” and “tenant farmers” financed Europe’s and America’s Industrial Revolution, including the building of their railroads, factories, mills, and their entire infrastructure. It is truthfully asserted that the major cities of America and the Western world were “built with bricks of cotton.” Today the debt traps designed to ensnare the working poor and middle class in a lifelong cycle of debt—the high-cost installment loans that charge usurious interest rates of 100% or more, the “payday” loans that charge 400% interest, the extortionate credit card multi-charges, the subprime mortgages with ballooning interest rates, and the home equity loan swindles—are the bastard children of the sharecropping American South. It