I just read the following. It pertains to mortgages. I'll let you be the judge of its feasibility.
*Why Banks Aren't Lending: Bond vs. Loan Valuation* One of the biggest causations of the 2008 market crash was the way Wall Street bankers were packaging and selling mortgages as a sort of investment package similar to a bond. Have you ever wondered why it is that when you take on a mortgage you write a check to a number of different banks throughout the life of the mortgage? The reason is because banks sell mortgages back and forth to each and to different investment funds throughout the U.S., and sometimes even the world. *Valuing a Bond* What is a bond? A bond is a type of debt that is typically issued by a bank or a municipality that pays a coupon rate to its holder throughout its life, and then at the maturity date the bondÂ’s face value is paid in full. When the interest rate is lower than the coupon rate the bond sales at a premium while when it is above the coupon rate the bond sales at a discount. This is because investors are going to get the market rate of return throughout the duration of the bond they buy, so that rate will be realized by either the amount they pay for the bond or the cash flow generated by the bond. *Bond vs. Mortgage* A mortgage is very similar to a bond except that the mortgage holder is paid part of principle in addition to the interest. So valuing the mortgage works very similarly as well; when the interest rates increase the value of the mortgage decreases. So with interest rates at an all time low banks will look at your mortgage as becoming nearly worthless when the interest rates increase from the current all-time-lows to whatever they may be in 15 or 20 years. This is why banks are willing to accept less of a payment for a house if the offer is an all cash offer. Banks are always concerned with the present and future value of an investment, so they weigh the present value of your mortgage against the value of another investment available at a different interest rate they can earn if a cash offer is available. So your offer needs to be higher than the cash offer in order to compensate for the low interest rates. This is why private investors are assisting in holding up the housing market. J - Ninety percent of politicians give the other ten percent a bad reputation. - Henry Kissinger Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel. - John Quinton ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Order the Adobe Coldfusion Anthology now! http://www.amazon.com/Adobe-Coldfusion-Anthology/dp/1430272155/?tag=houseoffusion Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:362547 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/groups/cf-community/unsubscribe.cfm
