(See the original commentary at BullionBullsCanada.com: Thirty-Year Mortgages = Mortgage Rape )
As a natural “contrarian” I was forced to incorporate a “quirk” into my research going all the way back to my days in university. Not being able to find research materials which coincided with my own positions, I would read materials which supposedly supported an opposite point of view – and then explain how such research actually supported my own viewpoint.
I had another opportunity to resort to that technique this morning, as I scanned a rather absurd piece of Bloomberg propaganda. Bloomberg had managed to find an anecdotal account of a U.S. homeowner who had actually shortened the term of their mortgage. Bloomberg then proceeded to call this a “trend”, and kicked-out a laughable headline about “equity-building” by U.S. homeowners.
Meanwhile, back in the real world, nearly 30% of U.S. homeowners have “underwater mortgages” meaning that overall, U.S. homeowners have less equity in their homes than at any time in history. Bloomberg could have found a more credible topic if it had chosen to talk about “sunbathing in Antarctica”. However, as is often the case, in attempting to present a totally ridiculous scenario and market it as “fact”, it has instead disclosed one of the banksters’ “dirtiest little secrets”: the economic rape, or debt-slavery which these big-banks have created by extending the length of mortgages for countless millions of homeowners.
To illustrate this principle, I need only revert back to the anecdotal account supplied by Bloomberg. It noted that the U.S. couple which had cut in half the length of term of their mortgage from thirty years to fifteen years was only paying $250/month more on their mortgage but repaying principal twenty times as fast. This was accomplished largely due to the fact that by dramatically reducing the term of their mortgage, the couple qualified for an interest rate more than 30% lower than their previous interest rate (i.e. from 7% to 4.5%).
Now let’s once again return to the real world. In the real world, for every U.S. homeowner shortening the length of their mortgage there are ten other mortgage-holders (twenty? one hundred?) increasing the length of their mortgage. Indeed the favorite “mortgage modification” being offered by the banksters to homeowners on the verge of foreclosure is to dupe them into refinancing over a longer term.
Given that reality, let’s simply take the Bloomberg anecdote and reverse it. In going from a 15-year mortgage to a 30-year mortgage; in return for a modest savings of $250/month on the mortgage-payment, the mortgage-holder gets the “privilege” of spending an extra fifteen years doing nothing but paying interest to a banker. Again using the Bloomberg numbers, the homeowner going from the 15-year mortgage to the 30-year mortgage would only be paying 5% as much principle in the early years of that mortgage – and would likely be forced to pay an interest rate roughly 50% higher (using the Bloomberg numbers).
Given these parameters, it now becomes totally obvious that neither the banksters nor the Obama regime were ever interested in “helping homeowners” with the ongoing “mortgage-modification” farce. If there had ever been any good intentions here, the banksters would have never even offered these longer terms as supposed “help” for homeowners – since being raped economically is rarely “beneficial” to anyone. And if the banksters tried to simply stretch-out repayment terms (and call that modification “aid”) the Obama regime would have forbidden such deceptive, predatory tactics.
Along with demonstrating the “magical” benefits which occur when we reduce the compounding of interest (by reducing the term of a loan), the Bloomberg propaganda has also provided us (inadvertently) with what would have been a viable plan to “save” millions of U.S. homeowners – at little expense to either banks or government.
As the Bloomberg anecdote illustrates, once the term of a mortgage is greatly reduced it would have only required a tiny subsidy to “underwater” mortgage-holders to restore them to a solvent footing. That subsidy would be used to pay the small increase in monthly mortgage payments for (for example) a two or three year period – enough to justify refinancing the mortgage for a shorter term (and much lower interest rate).
For those arguing that such a scheme would not (necessarily) be a “permanent fix” for these underwater mortgages, I should point out that with the current (fraudulent) “rescue plans” by the banksters and U.S. government that about 1/3 of these “fixed” mortgages are delinquent again within one year. Thus in comparison, my proposal is much, much closer to being a “permanent solution” than the made-to-fail schemes which have been hatched to date.
This argument also illustrates another consistent “principle” in the very limited “modifications” being offered to homeowners by the banksters: they rarely offer any “modification” which would actually improve (as opposed to worsen) the position of the homeowner. Indeed, for every anecdote Bloomberg could dredge up about “equity-building homeowners” I could come up with one hundred – from desperate U.S. homeowners complaining that the only “modification” offered by their bank is one that would make them less solvent rather than more so.
Because the banksters almost always refuse any “principal reduction” and are often trying to dupe homeowners into accepting longer terms for their mortgage (rather than shorter ones), it is beyond any doubt that the Wall Street banks never had any intention to help homeowners, but rather were trying to do the opposite: dupe desperate homeowners into accepting even more suicidal terms for their mortgages.
One of the wonderful advantages of using someone’s own words against them is that it is very difficult to rebut such criticism. Obviously Bloomberg can’t (out of one side of its mouth) gush about how wonderful the “math” becomes when a mortgage-holder reduces the length of a mortgage – and then deny (out of the other side of its mouth) that greatly increasing the length of a mortgage is anything other than “mortgage rape”.
Indeed, as a general principle it is a very effective strategy to deal with the relentless propaganda bombarding us by carefully noting all of the “arguments” used by these purveyors of deception – and then to simply say “gotcha” each and every time they inevitably contradict themselves.
A “short mortgage” is a “healthy mortgage”. And the corollary to that is that 30-year mortgages (or longer, as are being given in many mods) are nothing more than debt-slavery and mortgage-rape.