Wednesday, November 16, 2011

Mortgages are a scam

According to a new Wall Street Journal/NBC News poll, 76% of Americans agree, do some degree, with the statement:

“The current economic structure of the country is out of balance and favors a very small proportion of the rich over the rest of the country. America needs to reduce the power of major banks and corporations and demand greater accountability and transparency. The government should not provide financial aid to corporations and should not provide tax breaks to the rich.”


Let's talk about mortgages. Everyone knows that adjustable rate mortgages (ARMs) were a scam. Subprime mortgages were pretty evil as well. As a hard working person who makes great money and owns (loans) a home, I'm here to say that a 15 or a 30 year mortgage is a total scam. 

Why? You might be saying to yourself, "But this is the foundation of our economy." or "This is what makes America great!". Yes and no. Here's why. 

Banks get to lend you money that they don't really have and you pay 3-4 times the value back to the bank in compound interest. On a $200,000 house at 6.5% compound interest, you are paying over well $500,000 for that house. It is fraudulent of the banks to market 6.5% loans when in fact they are much higher than 6.5% in the long run. Yes, banks should be able to make money, but not that kind of money. It's criminal. 

Not only that, lucky you gets to pay all the insurance for the property even if you don't really own it which, after 25 years of a 30 year mortgage, you still don't really own the place. That's right, even if you've payed 90% of the principle down, the bank officially still owns the property. You have to pay for all repairs. And the bank can take the property from you if you miss a few payments not matter how clean your credit is. 

That's the old American scam dream.

The American mortgage scam enslaves you into spending the majority of your working life, maybe your entire career, paying off a liability that lenders trick you into thinking is an asset. A mortgage loan is not an asset to the buyer; it is an asset to the bank only. The only time a home is an asset is when you own it free and clear or if you are renting the property for more than the mortgage, insurance, and upkeep. 

Unless you pay off the property really fast (within 5-7 years) you are losing big time. You might make out if you rent a room or two out, but few people are willing to do that. The only net wealth you are building is the bank's and as soon as you've built up some equity in the property, they are scamming you to borrow against it. That is totally predatory. It's like spending tens or hundreds of thousands of dollars to create a credit card that someone charges you to take money out of. Huh? Yeah, you can "live" inside that credit card, but you don't "own" it. 

How about we take these banks to task and demand real interest rates of 5% instead of criminally abusive compounding rates? How about the bank pays for a percentage of all repairs calculated by what percentage of the home the bank still owes? And how about we stop calling it home ownership when we live in a loanership society of debt slaves. 

We've bailed out these banks with taxpayer money and now we, the American people, should get a break from corporate abuse. How long will we let America be owned, literally owned, by the corporate class? When the right-wing says this is a class war, they are correct. They've been violently taking from the American middle class for decades. 

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