Lessons learned from my meeting tonight about the big banks (I knew most of this already but seeing it put like this just makes my blood boil!)
1. You sign a Promissory note for the mortgage - this creates the cash for the Bank.
2. The Bank then lends that cash back to you (therefore at no cost to themselves).
3. The Bank sells your Promissory note on the Securities Market.
4. You are then 'contracted' to pay that mortgage back over say 20 years, plus interest.
5. You default on your mortgage. All mortgages are insured by the banks, and the insurance company pays out to the bank on 91 days.
6. The Bank seizes your property because you have defaulted.
7. The Bank then sells your property at auction for below market value to get a quick sale, and then comes after you again for the outstanding amount.
If you had a mortgage for say 200k, the bank in the end have earned around 1.8 million - at NO cost to themselves!
And all of this is just digits on a computer.