A lot of American homeowners have a mortgage. In this legal agreement, a lender provides funding for the purchase of a parcel of real estate and the borrower, the owner, agrees to pay that money back over a period of time plus interest.
Let’s set aside all the potential variations, adjustable rate mortgages, interest only mortgages, Islamic mortgages, etc. The bottom line is a parcel of real estate bought with a loan.
That mortgage has value. On day one, it’s value is the amount loaned plus all the interest that would be paid over the term of the loan. You would think you could sell that loan, that there would be a market for it.
Fast forward. Because of a variety of conditions at level of the borrower, the real estate which the … Read entire article »
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Is This Mortgage Worthless?
September 28th, 2008 | Comments Off
A lot of American homeowners have a mortgage. In this legal agreement, a lender provides funding for the purchase of a parcel of real estate and the borrower, the owner, agrees to pay that money back over a period of time plus interest. Let’s set aside all the potential variations, adjustable rate mortgages, interest only mortgages, Islamic mortgages, etc. The bottom line is a parcel of real estate bought with a loan. That mortgage has value. On day one, it’s value is the amount loaned plus all the interest that would be paid over the term of the loan. You would think you could sell that loan, that there would be a market for it. Fast forward. Because of a variety of conditions at level of the borrower, the real estate which the … Read entire article »
Filed under: American Economy, Commentary, Original writing