jon f. ellis

Mortgages and mortgage interest is usury, it is charging money for money, and it is insane that Americans live to pay twice for a home that is already overpriced, and beg for the chance, literally paying a "down payment" to buy the debt.

A new $250,000 home actually costs much less to build than $250,000. Let's say the home you buy at $250,000 (cheap for homes North of Philadelphia), but it really costs $210,000 to build and your builder/contractor made a $40k profit. Of course, there wre plenty of people paid to make the house, so lets say the labor was $80,000, and materials $110,000, other stuff $20,000. Building a home is positive economic impact to the community, no problems there (but used reclaimed wood..., and contract some work yourself)

So, the new $250,000 home you buy (which is really about a big postivie cashflow into the local economy, which will cycle forever), you pay 10% down.

This is the point when people feel comfy.

"I've bought a house!"

No, you've bought a debt, one designed for you to pay double. No grace period. Difficult to pre-pay (nobody accelerates unless they win the lotto or win a lawsuit settlement).


HOW 6% = 194%


A $250,000 mortgage with 10% down at 6% interest costs you $485,635.08 over 30 years. That means you're actually paying 194% of the value of the home to the mortgage lender, for the privledge to pay over a period of time.

This is $1348.99 per month for most of your adult life, rigged to force you to pay mostly interest for the first decade plus of the loan. RUle of 7/8, I believe it's called. The 6% per year APY (very misleading) is not evened out over the loan, it's front loaded, so the bank holds the rising equity value in the home you are paying out the ^&*( for.



Think of it like this. You want Amazing Product-X. You pick out a nice new Amazing Product-X for $5000, which have gone up $250 in value every year they've been made. But it's out of your price range. You can save $1250 a year for five years and write a check, but you want it now. They tell you, oh, if you want it now, it's $10,000 (@ $2,000 per year), and you still really don't own it for five years, and it will be worth $6250 when you've paid it off.

.... Would you sign up for that? We do it every day when we finance cars at "6%" and it's really "16%". This is what I mean about truth in lending. . .



A Year after you've bought your $250,000 shiny new home debt, you've paid $41,187.88, including down payment. Guess how much of your house you own? $2760+ your down payment, or $27,760. You've paid the bank $13,427 to stay in a home worth $250,000 and they will a majority share of the home for the long forseeable future.

Even a 15 year loan at a great Interest rate of 3%, they get $6000 per year of your $18,000 in payments per year.

Let's call it exactly how they call it when you get a payday loan. If you pay an actual Interest Charge of 197% (which is common), then they MUST disclose this. They can tell you it's 23% APY, but if you make the minimum payment, you are paying back $800 on that $400 loan.

Now, if people want to agree to these crazy rates, then we truly have lost our ability to think and reason in the US, and it doesn't matter who's the next President.

But, if Obama takes the opportunity to educate, as Ross Perot still does, and even possibly change Wall Street as well as Washington, this could be some good years for us.

Let's start with True Federal Truth-in-Lending Law requirements, and let's discourage complex interest contracts. Let's ask banks to Radically change how they charge for mortgages, for the sake of America. Let's not give them $700,000,000,000 for more of the same. Let's ask them to sacrifice, and see what they answer. The carrot is, no $700B unless it is used like this

- the rate listed for customer is the rate paid over the entire loan, divided evenly over the entire loan. This gives people a fast-tracked way to gain equity and fully understand thier loans at a glance. Simple interest loans.

- adjustable rate loans will use the same terminology, and have ceilings. So when someone signs a $250,000 mortgage that is adjustable from 6% initial APY to 11% adjustable rate APY cap, they realize right up front it means their little $250k home loan can go from $500,000 to $711,000 in an instant, on a house worth, well, $250,000.

- most importantly, only allow simple interest loans, did I mention that?



FUNDAMENTAL CHANGE REQUIRES BOLD LEADERSHIP, NEW OPTIONS, CREATIVE THINKING

Let's finally make 6% back into 6%. Do the math, forget tax breaks, time to refurbish the houseing and mortgage industry. Fundamental Change, right, Mr. Obama? FUNDAMENTAL CHANGE.

Bailouts are not fundamental change, unless it puts a few hundred million back into a Rich Uncle's failed mortgage company so he can do it all over again. That would be a great change for me!



. . . so I guess ya'll know how i feel on that issue!

- Jon



P.S. - Simple Interest

Heck, I'd pay 15% simple interest for a 15 year $300,000 mortgage. That's $45,000 to the bank, and my payments would be $1920 per month. The bank would earn $250 a month for 180 months, just for holding a piece of paper that says they own the house. At 2,000 mortgages, that's $500,000 a month to hold pieces of paper. MOrtgages do not require actual monthly work on the part of the, not 15 or 30 years of intense labor. It takes less than a few hours and maybe three people's time to move the title from one entity to another.