sales in real estate, defaults, re-buys…

So you sell much of your residential real estate holdings all at the same time… The prices hold because the market doesn’t learn fast enough of the product dump…Those who buy the homes take out big mortgages because they cannot really afford these houses, but they really want them because they are nice looking…The market crashes soon after, because so many properties were dumped at the same time, supply is no longer low to nil…So now your new home which was once worth alot, like yesterday, is now worth one third of what you paid in a contract to the bank…The contract was a credit contract called a mortgage…The bank knew you were probably going to default, because you were a high risk borrower…So the bank had taken out insurance on the fact that you were probably going to default…Let’s say this once again- the bank knew you were a bad candidate for a loan…

Anyways, you default on your loan from the bank…Why? because one, you can’t really afford the high numbers, & because two, you are depressed about the fact that your shiny new home is not worth much anymore…The depression is what really screws up your ability to pay…You don’t FEEL like paying off your loan anymore…So you decide to default on your loan…You say, I can’t pay…So the bank tells their insurance company, the guy didn’t pay, & the insurance company sends the bank some money to cover their supposed loss…Then the bank kicks you out of this new home & they take it & sell it off for cheap…Who buys this home for the cheap price? Well, let’s go back to the original seller…

The original seller sold off a bundle of residential properties for, well, a bundle…He got paid…A bundle for a bundle…Now his properties are back on the market at very very low reduced cheap bank prices…He liked these properties..So…He buys them back at cheapo prices…So now he owns his properties again, that makes him happy…He has a bundle of money, which makes him happy…The bank had insurance on the monetary loss which makes them happy…The loss was the difference between what they paid for the home to the seller & what they got for the sale of the house, plus the cash the new homeowner had forked over…So the insurance company ended up covering the difference in the market price of the house…The buyer walks away, losing the cash he gave to the bank for the loan, whatever that was…What percentage of money does the new homeowner give in relation to deciding to default & the house getting sold for cheapo? I’m not sure…maybe that money could be called rent money for living in the house…

The insurance company covers the loss differential between a low supply house market & a high supply…Low supply means something is rare, high means no…The more of something that is on a market, the lower the price will be…The less of something, the higher the price will be…Demand is another way of looking at the same phenomenon…

But insurance companies squeeze & eke out a living all through our lives…So maybe they could have afforded to cover this loss…But why? Why is an insurance company covering for market price drops? Doesn’t make sense…They don’t cover market share drops in other fields, why the house market? The only sane explanation is that somehow they profited from the seller’s take…Say the seller was Ivanka Trump…Say maybe just on paper, say her dad put her name on a bunch of deals or properties…Say, when the seller took her profit, somehow the insurance company got a skim amount back from that profit…Or maybe, more correctly, not an insurance company, but say an employee in the insurance company…

If the seller & an employee in the insurance company were in cahoots, then they both walk away with a profit…Say the seller is not Ivanka…Say the seller is not pretty or nice or blonde or female or honest…Anyways…Who profited from credit default swaps? A credit default swap is that insurance on the new buyer defaulting…Some of the so called insurance was offered by individuals…Not insurance companies…But they would lose money unless they were in on the profit right? If the buyer defaults, they have to pay up right? But why didn’t they lose money? Why didn’t they lose money? Ok, if the buyer defaults, the bank is covered for the loss in selling price when they sell at cheapo…Say that loss is two thirds of the total amount paid out to seller…Let’s ignore any cash going in from the new buyer for now…That 2/3 is covered by their default insurance…If a third party, besides the insurance company, was offering insurance in the form of a credit default swap- then that 2/3 money has to come from that third party? The bank gets that money…Or the insurance company if the third party was underwriting for the insurance company’s loss…

So the insurance company gets that 2/3 money…? Paid by the guy who holds the credit default swap…So the credit default guy is out 2/3 the cost of the house, & the insurance company gets the money…? But is that really what a credit default swap is? No…In fact, that is just credit default insurance…A credit default swap means that the guy who holds it, the third party, gets the 2/3 money IF someone in that chain defaults…

So the third party guy gets 2/3 of the house price sale differential, & someone else is out…Who is that someone? Some poor patsy is my guess(the newspapers say the bank was the patsy)…Really the whole thing is just a big pile of bull anyway because insurance companies aren’t really supposed to cover for supply & demand flux…Are they? Well, if they do that means that even if your business is terrible, you can claim money…Well, the gov’t bailed out the banks which is that…

The truth is maybe the banks deserved to lose big time…Why? Because they bought houses at too high prices & sold them for too low prices…That is very very dumb…Which is why one wonders why banks are in the stock brokerage business, the insurance business, & now the real estate business…? Because they are not very good at any of the three so far…Maybe one should go to a real stock broker, a real insurance agent, & a real real estate appraiser, instead of lazily going to the Walmart of services, your friendly local bank…’Cause friendly & stupid sometimes go hand in hand…

About GroveCanada

Artist Statement: I like to push...Push the fold...Innovate...Figure out how to do something then figure out how to do it even better...I get bored once I accomplish something...I can’t seem to make multiples...Once it is done, it is done ; I am not going to make another one...This can hurt profitability...But I feel the paradigm of repetitive production is obsolete...I see a future where pure intellectual innovation will be rewarded without the need to commercialize it somehow...I wonder about the Star Trek idea of a new culture where money is not the driving force...I live that future already... Bio: Sari is an optimist by nature, someone who always sees the sunny side of things, even if there is no sunny side really...She grew up with two wonderful parents & a great brother...Later she married the very best guy in the world, another artist named Joseph Grove...She likes art because it is for her a happy place to be...A place where joy can reside...So she decided to make art herself because that was the nicest thing she thought she could do for people’s lives...I’d tell you more about angst or strife or misery or struggling, but really, that was not the case...But perhaps, because I am Sari ; I am writing this, my perception is warped by my extreme positivity...But, to tell you the truth, life has been good... p.s.You can read more about my credentials on my main website at http://www.grovecanada.ca ...But I have left a few things out, credential-wise... My feeling is:"By their fruits, ye shall know them" which is from the New Testament, Book of Mathew(7, 16-20)... So read my books ; see if the fruit tastes good to you...I feel those are better credentials than telling you something on a resume... p.p.s. I am a Christian...Whatever that word means to you...
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