[extropy-chat] Redistribution of wealth

[Kevin Freels]

Sounds good, but one in the hand is better than two in the bush. Also, the
lender likely borrowed the funds themselves from elsewhere at a lower
(prime) rate and since rates are higher in this scenario, the lender sells
the new higher rate loan, but also has a higher cost. The margin remains
roughly the same. The lender makes no more money in a high rate environment
vs a low rate environment. Meanwhile, low rates attract more investors and
homebuyers which in turn means more loans are written. In high rate
environments, there are less loans to go around and the lender isn;t
guaranteed to get a new loan at all.





----- Original Message ----- 
From: "Matthew Gingell" <gingell at gnat.com>
To: "ExI chat list" <extropy-chat at lists.extropy.org>
Sent: Wednesday, September 29, 2004 1:03 PM
Subject: Re: [extropy-chat] Redistribution of wealth


> Kevin Freels writes:
>
>  > Contrary to popular belief, banks are simply not in the business of
taking
>  > properties. It serves them no purpose. Most of the time, they lose
money on
>  > a foreclosure. The rest of the time, they get the balance of their
loan, any
>  > costs it took to get their money, and the remaining portion of the
proceeds
>  > go to the former owner. They make their money off interest and they
make
>  > interest by making loans, not the other way around.
>
>  That isn't always true. Imagine you're a bank: You issue a 30 year
>  fixed mortgage at 6% and rates subsequently go up to 7%. You would
>  very much like to foreclose, get your principal back on the 6% loan,
>  and lend it out again at the higher rate. Otherwise your money is
>  stuck in a less that market rate investment for 30 years.
>
>  -Matt
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