Sunday, November 19, 2006

Repeat after me, class: banks are not your friends.

Entry for Monday, 08 August, 2005

There was a link on today about San Diego and the beginning of the burst of the housing bubble. It was bound to happen sooner or later, and it appears the answer is now sooner. It should be obvious to even the most amateur economists that the price of housing is far beyond what the average salary of most states can afford to buy.

This, however, has not stopped banks from trying to get people to part with their money, and later "their" property. Instead of recognizing that people simply can't afford the homes for sale and telling them so frankly, the banks have devised every means of getting these poor suckers to part with their hard earned cash for an illusion that will be rudely stripped from them when the tide turns. Interest only mortgage payments, balloon mortgages whose interest starts at near nothing and then at a later date balloons up to something "normal," mortgage payments that take up to half of a person's take home pay(after all, the "gross" pay looks good) - these scams are shameful and the banks are 100% responsible for the results of these loans.

But they won't, of course. They will say no one held a gun to everyone's head and made them buy a house. Or, they will say, "It was the speculators and land flippers that caused this, not us!" No, people aren't forced to buy houses, exactly, unless you count their friends, relatives, and societal pressures, and, of course, the banks who lie to them and tell them they can afford it when they can't. Make no mistake - it is a lie. A baldfaced lie, even. They know what the end result is going to be, and they do it anyway. They must want people to go bankrupt. That's why their protests of innocence are not going to fly with any reasonably intelligent person. They hide from people what the effects will be when the sweet up-front terms of the mortgages expire and the market for housing cools so that they will be stuck with a home that they can only sell for a fraction of what they owe on it.

If anyone is interested, pun intended, I will tell you how this happened.

Yes, greed was involved, and yes, stupidity was involved, but really, the cause of this is none other than sin. Usury is a sin. God forbids businesses from charging interest to their own countrymen. When you consider the interest plus the principle of the loan, it should be obvious to even an idiot that people cannot afford land at these prices.

For example, ten years ago, the purchase price was $75,000 for our house. It was not in good shape, but it was in a very up-and-coming location. At the time, we looked at the truth-in-lending page and were astonished to see that the real price we were paying for the house was about $210,000. Think about this. They tell you the price of a house is x, and then they charge you 3x for the house. But people don't think about that. They just look at the purchase price. The banks and realtors tell them that they can afford z times their salary as a purchase price. But the truth is that z not nearly enough to afford the real cost of the house.

After a while, people will figure this out the hard way - when the mortgage payment is sucking the life out of their family. Then they will have to sell the house. This is starting to happen already, in part because of these "creative" mortgage arrangements and in part because local governments are gleefully financing their irresponsible spending sprees on the backs of people who buy houses. Some people, however, will wait until it is too late to try and sell their house. They will wait until they have no other option - along with most other people who also waited. The market will be glutted, and people will be stuck with houses they can't afford and can't sell, either.

And you can bet the local governments will not be nearly as quick to lower the property taxes on the house as they were to raise them.

Speaking of which, it is another lie to charge mortgage holders with the property taxes for these buildings. The mortgage holders do not really own the buildings. The banks do. The bank can kick you out of "your" building if you can't pay them for three months, and you have no recourse. That makes them the owner, not you. Yet your local government claims you owe them property taxes for property the bank owns, and raises the assessment as high as they can get away with. If you can't pay your taxes, the government kicks you out of "your" building and you have no recourse. So the government and banks are the real owners of the land. Local governments and banks are scamming people and then forcing them out of the homes they think they own. The banks turn around and "sell" the property by way of a mortgage to some other sucker.

The founding fathers would all have a collective apoplexy if they knew. This is the exact type of scenario that they wanted to avoid. And yet here we are.

Now, our house is assessed at about $160,000, over double the original price in under ten years. The actual selling price of homes in our neighborhood, though, is $180,000-200,000, approximately. Some have sold for more. We are asking $192,500, to cover the cost of the work we have done on the house and other debts. If we sell the house for this price, we will not have any money left over after we pay the mortgage and other debts - because of usury. And when you think about it, the real cost of our house was $210,000ish. So we aren't even going to make the real cost of the house when we sell it.

I don't think many people realize this fact. If you work your backside off and pay your mortgage diligently, when you sell your house you will get more than your purchase price (unless the market really tanks to the ground), but you will not get what you were actually charged for the house. If you tried to charge the actual cost of your mortgage, people would laugh at you. You could never get that much for your property.

I honestly feel sorry for whomever buys our house. They will think they are buying a house for around $190,000, but in reality they will be paying almost $600,000 for the property, because of usury. And I assure you, there is no way the average salary in our state can support over half a million dollars of payments. Or even the average salary in our county.

Now, class, do you see why banks are working so hard to keep people from realizing they can't afford to buy property?

Or do you still imagine that banks are making up these mortgage options out of an altruistic desire to help people be "homeowners?"

Really, class - such naivite! Get out your pens and paper. Now write 100 times: "For Profit Corporations do NOT care about me; For Profit Corporations care about making MONEY."

Class dismissed.

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