BANKING ON YOUR HOME
Back in August 2016 I wrote a piece entitled, "Who owns what?" A year before that in July 2015 I wrote another on a similar topic entitled, "Whose Liable?" The subject matter was about our homes and the banks and the necessary evil of our having to borrow from those banks to buy our homes.
To refresh your memories, the mortgage contract you sign/ed with your bank is a pretty one-sided agreement. In return for imaginary money the Bank conjures out of the blue, (brings into existence), you must pledge up to thirty years of your working life to pay them back far more 'real' money than the imagined amount they created in the first place. My previous articles raised the question as to which party actually owned the property for the duration of that mortgage. Most of us came home one day saying, "I've bought a house," but what does that really mean?
To understand all of this you need to go back to your most simple interaction with the banking system. Take for example the regular action of depositing cash in your saving's account. Your clear understanding of that transaction is that they are accepting the cash to put it in safe storage for you should you need it later. However, the bank's understanding is entirely different and their understanding forms the legal basis of that transaction. The bank's view is that you are loaning them that cash to do as they please with and that is exactly what they do.
So when you give the bank deposit money you are actually loaning it to them. When the bank gives you the mortgage money, they are loaning that to you. It seems very straightforward. However, again the understandings between the parties are at variance. You view your mortgage as a debt that you owe to your bank while they view that debt as an asset the bank owns. However, right from day one, you also view your home as your asset. You truly believe that you own it and you even idly scan the property pages to find out how the value of that asset has improved. I have heard grown men in the pub openly boasting about having made twenty grand the previous year without lifting a finger. To further confuse things, during the boom the banks were loaning money based of the higher value of your asset. In doing so, they were treating the home as yours. Strange then that when the bubble burst the banks were able to eject so many from family homes and re-possess the properties.
I argued in this article that the family home should have a special status, which would forbid a bank from re-possessing it. As the law stands, when you signed the papers in the bank the day you got the mortgage, you entered into a formal and legally binding agreement with that bank. When you can't make the repayments that same bank utilizes that formal and legally binding agreement to eject you and your family because in law, you have not kept your side of the written agreement with that bank while they have kept theirs. I have serious reservations about this but now something else even more sinister has come to light.
Under the headline, “You get an awful fright when you get a letter to say your mortgage has been bought by a vulture fund,” the Journal this morning highlights this new practice by the banks. It goes back to the fact that when they get your signature on the mortgage agreement they, (your bank), consider the resultant debt to them to be a "Bank asset." Like all assets then, the bank feels within its rights to sell or dispose of it as they see fit. To my mind, this could not possibly be legal, never mind the blatant lack of morality. Your binding contract is with Bank A and if they sell that 'asset' to Bank B, it has nothing to do with you because to my mind, you never signed anything legal with Bank B, they never gave you any imaginary money and in fact, you've never met them or set foot in their place of work. When Bank B come calling for the monthly repayments you should be legally in your rights to tell them you have no signed contract with them to pay them. If your personal debt can be bought and sold then so too can your reputation or anything else you hold dear.
Look at it another way. Who owns what because we're back to that again? You are in the house, you have money outstanding to Bank A for the privilege and then along comes Bank B stating they too have a claim on your bricks and mortar. Surely you could just say to Bank B, I'm sorry to hear that you are owed money but that's not my business. My business is with Bank A and if they are breaking the terms of my signed agreement with then twenty years later then I no longer have a contract with them. So if they then sold you, (Bank B), that agreement then more fool you. Otherwise all contracts become worthless and all money will have to be up front or not at all.
Where is the legal flaw in that thinking?