Real Mortgage Reform: No A.P.R. and 25% to 30% interest
If Congress and Paulson want real reform in the lending sector then they would consider getting rid of the annual percentage rate scam that we have been suckered into for years. With an annual percentage rate, the borrower ends up paying WAY to much extra money for a loan.
Just look at the old rule of thumb on a home loan. You pay back over the period of thirty years three and one half times the loaned amount. In other words a $100,000.00 loan costs the borrower $350,000.00 dollars. This is a rip off and scam that needs to be outlawed.
Real reform in the lending practice, one that will benefit the working people who have not so good credit and those who want to improve their credit will come from change to the interest rates and practice of imposing the theft by the banking institutes. The larceny that our government supports. Why do they support this theft? It is all about the money.
As I showed you a profit of $250,000.00 on a loan of $100,000.00 dollars is absurd. Real reform would take the A.P.R, and unmask its lie. If you were to charge a flat interest rate of 25% on the $100,000.00, a profit of $25,000.00 is made. A lot of money still. However not even close to the profit of the low A.P.R. of say 4% to 6% that people of good credit receive.
Let us not even get to the flat out theft of those with bad credit that cannot afford a loan to begin with. In other words those who are getting loans form the BANKRUPT FANNIE MAE AND FREDDIE MAC, CONGRESSIONAL BACK mortgages. These people are paying , what 10% to 14% on a thirty year loan. Talk about absurd profits.
If you look at the monthly payments which average around $2000.00 a month. Just compare this to a simple rate of 25% for only 15 years. That's $100,000.00 at 25% = $125,000.00/ 180 months = $694.44 per month. A huge reduction in the monthly payment. A minimum reduction in the length of the loan by 5 years (shorter then a 20 year loan). How many more people could then afford a home? Thousands more.
Let us take the average cost of a home now. A home of $250,000.00. Now we hit it with an interest rate of 25% (for easy figuring) That is a profit of $62,500.00 dollars. Making the loan then total $312,500.00. Now divide that by 15 years or 180 months. You get $1,736.11 as a monthly payment. Make it a 20 year loan and you get, (312500.00/240), a monthly payment of $1302.08. Now I am not saying that the interest rate has to be 25%. It could and should be lower. But look at the monthly payment compared to what is being charged now.
A simple principle of economics is being applied here. Instead of making a retirement profit per each loan. The banks would make more money by making more loans at a lower rate. It is the same thing that makes Wal Mart such a huge retailer. Low profits per item and huger profits from mass sales.
Will anyone in Washington consider this as a viable resolution to aid in the failing plans of the home mortgage industry and floundering housing industry? Absolutely not, again it is all about the money. To many Congressional pimps are receiving some form of kick back from the lenders to keep home buyers under their thumbs. Kickbacks in the form of lower rates on loans, jobs after their terms in government end, and stock bennies as a "consultant/lobbiest" for the lenders.
Just look at the old rule of thumb on a home loan. You pay back over the period of thirty years three and one half times the loaned amount. In other words a $100,000.00 loan costs the borrower $350,000.00 dollars. This is a rip off and scam that needs to be outlawed.
Real reform in the lending practice, one that will benefit the working people who have not so good credit and those who want to improve their credit will come from change to the interest rates and practice of imposing the theft by the banking institutes. The larceny that our government supports. Why do they support this theft? It is all about the money.
As I showed you a profit of $250,000.00 on a loan of $100,000.00 dollars is absurd. Real reform would take the A.P.R, and unmask its lie. If you were to charge a flat interest rate of 25% on the $100,000.00, a profit of $25,000.00 is made. A lot of money still. However not even close to the profit of the low A.P.R. of say 4% to 6% that people of good credit receive.
Let us not even get to the flat out theft of those with bad credit that cannot afford a loan to begin with. In other words those who are getting loans form the BANKRUPT FANNIE MAE AND FREDDIE MAC, CONGRESSIONAL BACK mortgages. These people are paying , what 10% to 14% on a thirty year loan. Talk about absurd profits.
If you look at the monthly payments which average around $2000.00 a month. Just compare this to a simple rate of 25% for only 15 years. That's $100,000.00 at 25% = $125,000.00/ 180 months = $694.44 per month. A huge reduction in the monthly payment. A minimum reduction in the length of the loan by 5 years (shorter then a 20 year loan). How many more people could then afford a home? Thousands more.
Let us take the average cost of a home now. A home of $250,000.00. Now we hit it with an interest rate of 25% (for easy figuring) That is a profit of $62,500.00 dollars. Making the loan then total $312,500.00. Now divide that by 15 years or 180 months. You get $1,736.11 as a monthly payment. Make it a 20 year loan and you get, (312500.00/240), a monthly payment of $1302.08. Now I am not saying that the interest rate has to be 25%. It could and should be lower. But look at the monthly payment compared to what is being charged now.
A simple principle of economics is being applied here. Instead of making a retirement profit per each loan. The banks would make more money by making more loans at a lower rate. It is the same thing that makes Wal Mart such a huge retailer. Low profits per item and huger profits from mass sales.
Will anyone in Washington consider this as a viable resolution to aid in the failing plans of the home mortgage industry and floundering housing industry? Absolutely not, again it is all about the money. To many Congressional pimps are receiving some form of kick back from the lenders to keep home buyers under their thumbs. Kickbacks in the form of lower rates on loans, jobs after their terms in government end, and stock bennies as a "consultant/lobbiest" for the lenders.
