My Meeting With A Mortgage Broker
The following is the true story of how I showed my wife the truth behind the home mortgage swindle that all Federal Reserve Banks play upon people whose humble desire is to one day own a home of their own. As all financial statistics indicate, for most people, their home is their largest investment. Unfortunately, for most of them, that same home is also their biggest liability. This is because of the 360 payments that must be made over the course of thirty-years, in which the same home is paid for nearly three-times over, just so the individual can enjoy living in one home.
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By the spring of 1998, my wife and I were ready to enter the market as first time homebuyers. Because of my background in both business and finance, I knew that the single transaction that would deliver the most bang for the buck would be to purchase a house by paying cash. This would deliver us a free and clear deed, and our semi-annual tax bills would show no outstanding mortgage. Here alone, we would save additional thousands of dollars by eliminating the need for tax escrow accounts. Finally, I would now be able to put to practical use, all of what I had learned in the previous twenty-years of working both as an investment banker, and as an owner of a small-business in the graphic art and commercial printing field.
Because of this business training, I knew that by purchasing a home outright, I would eliminate approximately a quarter of a million dollars in debt that I otherwise would have had to find some way of paying. The manner I have taken to explain the true level of mortgage debt is simply this --- I would have been paying for three houses just for the privilege of living in one! In March and April 1998, the precise time we were looking to purchase our home, the prevailing interest-rate was 7.21%. While the bank may claim that the loan is only at an interest-rate of 7.21%, by the time the loan-sharking concept of compounded-interest is added, the true interest-rate ends up closer to 125-150%, than 7.21%. I honestly wonder why this doesn’t seem to violate those truth-in-lending laws that are supposed to protect the individual.
At first, I had trouble convincing my wife that this was a transaction that would benefit us in the long run. I couldn’t blame her, as the truth about home mortgages is never taught in high school, or even in college. So, my compromise was to schedule a meeting with a financial advisor from one of the major banks in the Western New York area in which we live. As to not further embarrass this individual, who still works in this same position for this same bank, I will refer to him as simply, Mickey Mouse, as this was certainly the level of his so-called expert advice.
Likewise, as to not identify the bank, let me give it the fictitious name of “Buffalo Savings and Loan.”
One of the biggest hurdles that I had to overcome, as far as my wife was concerned, was the “This Is Just The Way It Is Done” argument. According to her, we might as well get a home-mortgage, because everyone we know has one. This was a powerful obstacle in which to overcome, because she was correct --- everyone we know does have a home-mortgage! We had known each other and had been together for a few month shy of ten years by that point, and I asked her to name me just one instance where I did anything merely because someone else was doing or had done it.
I carefully explained to her that I was a wolf and not a sheep, and was a leader instead of a follower. I sat her down several times with a calculator and a legal pad in front of each of us. I explained that the home-mortgage was complete loan-sharking, a scam that played fast and loose with semantics, and it bent the so-called truth-in-lending laws all out of proportion, so they were no longer of any real use or value. Finally, she said that we were getting a home-mortgage, and that was it. However, it was at that time that I explained to her that so long as I was alive and part of her life, there was no way I would agree to do something that I knew would cause harm to the both of us and the family we would one day have. As both of our names would be on the deed, I finally told her that I would refuse to sign any such home-mortgage contract.
We had begun to look at houses, and we went through a local real estate broker that I knew personally, and as a former business associate and friend, I knew that she would not take advantage of us in any way. I began to think if there was any way that I could get through to my wife on this issue, a matter about which she was clearly woefully misinformed. I finally asked her if she could give me one hour of her time, as that was all I would need to prove to her that the home-mortgage was a brutal form of financial rape. She asked me how I could teach her that much within one hour, and I replied by telling her that I would simply schedule a meeting with a local mortgage broker --- and it would be him or her that would show her the truth, and not me.
This was a highly unusual technique, and it did pique her curiosity. I immediately got the phone book out, and looked up the name and number of a local mortgage broker. I called and scheduled an appointment for the very next afternoon. After confirming the time and place of the appointment, I again repeated to my wife that it would be the mortgage broker that would be giving her the answer, and not myself. She doubted this, and asked me how I planned to get someone to admit that what he did for a living was actually a scam of monumental proportions.
“You’ll see,” was all I would say for the moment.
During the ride to the appointment, I explained to my wife exactly what we would say to the mortgage broker, and more importantly, what he would say to us, and what he would ultimately recommend that we do. I further explained that whatever his suggestion was, it would benefit the bank ONLY, and not us in any way. These ideas were met with genuine skepticism, as she had never heard of this before. But, just as I said on that day --- the home-mortgage scam is one of the dirtiest lies ever laid upon the good and honest people of the American middle class.
Here is an actual transcript of the meeting, which took place in March 1998, where we spoke with a financial advisor from Buffalo Savings and Loan [not its’ real name] a local Buffalo, New York USA bank well-known for its’ home-mortgage lending:
Mickey Mouse: “Good morning, what can I do for you today?”
Kentroversy: “Good morning, we would like to talk to you today about the best way of investing a sum of money we will be soon receiving in the form of a financial settlement. The sum total of what I will be receiving will be more than enough to purchase a house, if that is what you agree we should do.”
MM: “How much money are we talking about here?”
Kentroversy: “The total that we will be discussing today is a fraction of the entire settlement, but it is enough to purchase a house outright, for cash. Let us say that for the sake of this discussion, it is $100,000. We would like you to show us what would be the best way of investing this amount of money.”
He nodded to indicate that he understood.
MM: “Do you have a house in mind?”
Kentroversy: “Yes, the purchase price including all taxes and closing costs, will be $95,000.”
MM: “Is this going to be a one-time payment?”
Kentroversy: “Yes, it is.”
MM: “Uh-huh, I see.”
He then began to punch a series of numbers into his computer terminal, which was pointed away from us, therefore I could not see what he was doing exactly.
MM: “Here is what I would do if I were you,” he began. “Let me ask you the following question; is having liquid money important to you? You know, money that you can get your hands on whenever you want?”
Kentroversy: “Of course it is.”
I glanced over at my wife, and winked, as she nodded in agreement to what the mortgage-broker was saying.
MM: “Well then, what I would recommend is instead of purchasing the house outright and spending all of your available cash, I would recommend that you put down a very small down payment, and finance the rest. This way, you will have more money in your pocket from month to month.”
This clearly was an outright lie. What this man was telling us was that by holding a $90,000.00 home-mortgage, we would have more money in our pocket from month to month. At the quoted interest-rate of 7.21%, our monthly payment would be $679.47 per month. By the time the escrow account and taxes were included, this would cost us roughly $1,000.00 per month for the next 30 years (360 payments).
Kentroversy: “What amount do you recommend as a down-payment?”
MM: “I would put no more than five or ten thousand dollars down, and mortgage the rest. Doing this will allow you to keep more of that $100,000 for other things you enjoy doing, such as going on a vacation. You will be able to keep $90,000 to do with whatever you want, which is a big benefit to you.”
I was completely dumbfounded. How could this man tell us with a straight face, that an extra expense of nearly $1,000.00 per month benefits us in any way?
Kentroversy: “Okay, that sounds fine. We will sign the paperwork, but first, I would like you to answer me just one simple question about something I do not understand.”
MM: “Okay, go ahead and fire away.”
Kentroversy: “How does my paying for three houses, all for the benefit of owning and living in only one house, benefit me in any way? Because of the compound-interest scam your bank is trying to get me to agree to in complete ignorance, the 7.21% interest rate you quoted is in reality, closer to 150% by the time the thirtieth year of the mortgage is paid, and all of the compounded interest is added. Allow me to ask this in a slightly different way --- how does our paying $250,000 for a $95,000 house benefit us in any way?”
The mortgage-broker was visibly stunned. A look of shock overtook him, as he was truly at a loss for words. There was simply no way of answering my completely straightforward question, because he knew very well that such an arrangement benefits only the bank, and never the customer.
Worse yet, it was clear that I knew this, as well.
At that point, I looked over to my wife who was sitting next to me, and said the following, with a huge smile on my face:
Kentroversy: “See, I told you this is exactly what would happen. The home mortgage is a complete scam, and this gentleman’s reaction to my simple question proves this is true.”
It was then that the meeting was clearly over, with me saying the following to the mortgage-broker, who was completely blindsided by the manner in which I easily manipulated the conversation:
Kentroversy: “Thank you for your time today. You have proven beyond any doubt to my lovely wife here that you and people like you are predators, and this bank and the Federal Reserve Bank system condones this fraudulent activity. If I made this offer to you, I would be considered a ‘loan shark,’ and I could be arrested for just that. But, because it was you who made the offer to me, it is legally sanctioned by the criminal privately-owned Federal Reserve Bank system. Even though you broke no laws, it is still morally bankrupt for anyone to behave in such an unethical manner. You should be ashamed of yourself, because I certainly am.”
And, with that, the meeting was over. The stunned look on this man’s face was truly something to behold. It is a memory that I cherish to this very day!
In the car on the way home, my wife thanked me for opening her eyes to a situation that would have clearly victimized her, had I not been there. And, within that few moments of clarity, I single-handedly eliminated over $150,000 in additional expense our household no longer has to worry about --- for the next thirty-years!
Now you know why I referred to this mortgage-broker as Mickey Mouse!
This was the first of many issues where I showed to my wife, another side to what most people refer to as “that’s just how things are done.” While this may be true, and this is the way in which most people buy a home, this does not mean that I have to condone or participate in it for myself. It is this follow the fool in front of you mentality that continues to rob people of what could otherwise be their life-savings, because “that’s just how things are done.” This was a truly priceless life-lesson for my wife, and this is also going to be taught to our son, in the hope that he too will be able to benefit from this knowledge, and the wisdom of his mother and father.
THE TRUTH HURTS:
One afternoon during the summer of 2001, a friend of mine named Mark that I have known since the beginning of high school, came over to visit. We got to discussing home mortgages, and I asked him if he truly understood what he would ultimately pay for his house. As we were beginning the conversation, he honestly believed that he knew. However, by the end of this conversation, my friend confirmed that he was clueless about the amount he would have ended up paying by the time the end of the thirtieth year of his mortgage was paid.
“Mark, let me start by asking --- what do you believe you paid for your house?” I began.
“$55,000.00” he answered rather quickly.
“And what interest rate did the bank charge you when you purchased the house?”
“10%,” he replied. “It was awhile ago, and the interest rates were much higher than they are now.”
“I can tell you for a fact that you paid much closer to $175,000 for your house that you just said had a $55,000 market value. In fact, here is how you can figure out for yourself what your final cost is. When you get back home after our visit, go to your desk drawer, and pull out your mortgage coupon book. Take the amount of your monthly payment and multiply that number by 360, which is because there are 360 months in thirty years. That amount will represent the true and final cost of the house you claim cost only $55,000.
When you are finished calculating this amount, call me back, and tell me the final cost you arrived at. Is that fair enough?” I asked.
He agreed that this was more than fair. About an hour after my friend left my house that day, my telephone rang. I picked up the receiver to hear the voice of my friend, who had by then, become rather irate, and proceeded to blame me for showing him something that he did not want to see. He was extremely upset, and I reminded him that the only person at whom he should be mad, was himself.
He even stated that it was somehow all my fault, to which I replied:
“I wasn’t the one that signed the loan agreement. You have nobody to blame but yourself by your agreeing to pay $174,000 for a home that has a $55,000 market value. As it is, I am only showing you part of the truth. It is up to you to see the rest of the truth for what it really is. Besides, would it have harmed you if you had taken a calculator into your meeting with the lending bank? Perhaps you could have been spared the added expense.
If your house was $55,000 and the bank charged a 10% interest rate, the maximum amount of that interest should have only been $5,500. That would have brought your final cost to a manageable $60,500 and that amount accurately portrays 10% interest. With the agreement you signed, you are paying interest that is 51 times the stated rate that you should have been reasonably expected to pay.”
My friend will have this financial noose around his neck for the next twenty years. As he will undoubtedly struggle to pay this debt, I will be enjoying the rest of my life, by having a level of disposable income about which, he can only dream. I hope he remembers this every time he sits down to write another check to pay off his home-mortgage loan shark.
I live my life by the concept of informed-consent. Whatever the situation is, I seek to learn about all the ways in which it benefits me, or ultimately harms me. The truly ironic aspect of the financial slave-masters is that they literally hide their true agenda in plain sight. This can be found within the fine print that most people do not bother to read, or that same hidden truth can be located on the Internet, and it is only a quick search away from being at your fingertips. This is the reason why I made a great deal of effort to learn exactly how the Internet search engines work, such as Google.
It has been often said that at times of great uncertainty, the solution pops up seemingly from out of nowhere. The Internet connection to my home is one of the most valuable intellectual assets that I possess, and it is for the reasons that I state above that I have made tremendous effort to learn how to maximize its’ effectiveness. With an Internet connection, and specifically, a broadband Internet connection, I have an entire library sitting upon my desk. The advantages of having access to this type of information make me much more effective in finding solutions to the problems of every day life.
It was on the Internet, where I was pointed into the direction of truth regarding the many personal disadvantages of the home-mortgage. The answers are out there, among the eight-billion web pages that populate the Internet. If the reader is interested in learning how to effectively search for specific information, then I would recommend that the individual study and learn something called Boolean Logic. Boolean Logic is the language of the Internet search engines, such as Google, which is the most widely used of all such tools.
There is a wonderful little handbook entitled “Google Hacks: 100 Industrial-Strength Tips & Tools,” which was written by Tara Calishain and Rael Dornfest, and published by the technical publisher O’Reilly. This concise book contains all the pertinent information one needs to become much more effective in using Google™ as a partner in research, and in the compiling and sorting of research data. This book is now in its’ second edition, and it receives my highest recommendation, both as a writer-editor, and as a researcher and journalist.
Google Hacks: Tips and Tools For Smarter Searching