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We don't need replacements. We need to eliminate these companies.

by jtr_47 8y ago

komali2 8y ago
I'm all for these companies burning to the ground (after the building has been emptied). I'm also all about a currency-less society. But until we reduce scarcity to a point where that is possible, presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? How should it be done? My first thought is an agency like the irs is set up to handle it.
- Retric 8y ago
  Loans don't necessarily make things more affordable. If 'nobody' could pay 1+ million for a home in a major city then home prices would drop until people could afford them. If anything credit agency's actively harm the middle class by allowing people to extract as much money from them as possible via higher prices. Sure, business loans are very useful but they don't require credit agency's.
  - freehunter 8y ago
    Prices can only drop so far, though. (Warning: completely hypothetical numbers inbound... they're just being used to illustrate the point, not for gauging real costs) If a 2x4 costs $20 and you need 2000 of them to build a house, the house has to cost at least $40,000. And if pieces of siding cost $20 and you need 1000 of them, then that house has to cost $60,000. That's going to be hard to afford out of pocket. You can save the same amount of a mortgage payment every month, but you still need a place to live in the meantime so you're doubling your cost of living until you fork over the $60,000 in cash. And you might say the cost of a 2x4 would come down too, but if a lumberjack is making $15/hr and makes one 2x4 every hour, then the cost of that 2x4 can only be $5 cheaper before that lumberjack is getting paid more than the value of his work. And you might say the lumberjack could get paid less, but at $15/hr he already needs to work 4,000 hours before he can afford to buy that $60,000 house (assuming no other expenses). That's two years of savings before he can buy a house, with no money for food, no money for an apartment, no money for a car. If you cut his wages to make the house cheaper, now he has to work longer before he can buy a house. And since no one can afford the house anyway, he'll likely be laid off before he saves enough money because no one can buy the lumber because no one can buy the house built from it. And of course, this is all ignoring that none of these businesses are making any money in this entire hypothetical situation. If we didn't have home loans, the cost of housing would go down, but it would still be completely unaffordable without a loan even if the builder was losing money.
    - Retric 8y ago
      Rather than paying less per hour or less for lumber people would end up with smaller homes. A 40k down payment on a 200,000$ house already pays for a significant structure. Not marble countertops, but perfectly livable if small. Further, as the buyer would not have a mortgage they could upgrade from a ‘starter’ home. But, only if they actually felt the need and saved up even more cash.
- RobLach 8y ago
  Historically lenders would lend over collateral, with your net assets being an indicator of your ability to pay them back.
  - Spooky23 8y ago
    Now lenders almost have a hybrid model -- they use the credit scoring to allow them to write the loan well over the recoverable value of the asset. When I was buying my new house, I found a lender who was willing to write me an interest-only, 105% LTV loan for the new house while I simultaneously had a mortgage on the old property. The premium was only like 1.5%, and I re-financed in a few months after the house sold.
- cesarb 8y ago
  > presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? How should it be done? The same way it's done in countries without these entities.
  - umanwizard 8y ago
    How is that?
    - toomuchtodo 8y ago
      The below article describes how it's done in Canada, the UK, and the EU. https://www.cnbc.com/id/41498097 https://www.cnbc.com/id/41498097
- xamuel 8y ago
  >presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? Well, that's kind of, like, their whole job description. If you can't evaluate peoples' trustworthiness, you shouldn't be in the business of professionally loaning money!
pbreit 8y ago
How would you propose lenders evaluate credit in such a situation?

We don't need replacements. We need to eliminate these companies.

by jtr_47 8y ago

We don't need replacements. We need to eliminate these companies.

I'm all for these companies burning to the ground (after the building has been emptied). I'm also all about a currency-less society. But until we reduce scarcity to a point where that is possible, presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? How should it be done? My first thought is an agency like the irs is set up to handle it.

Retric 8y ago
Loans don't necessarily make things more affordable. If 'nobody' could pay 1+ million for a home in a major city then home prices would drop until people could afford them. If anything credit agency's actively harm the middle class by allowing people to extract as much money from them as possible via higher prices. Sure, business loans are very useful but they don't require credit agency's.
- freehunter 8y ago
  Prices can only drop so far, though. (Warning: completely hypothetical numbers inbound... they're just being used to illustrate the point, not for gauging real costs) If a 2x4 costs $20 and you need 2000 of them to build a house, the house has to cost at least $40,000. And if pieces of siding cost $20 and you need 1000 of them, then that house has to cost $60,000. That's going to be hard to afford out of pocket. You can save the same amount of a mortgage payment every month, but you still need a place to live in the meantime so you're doubling your cost of living until you fork over the $60,000 in cash. And you might say the cost of a 2x4 would come down too, but if a lumberjack is making $15/hr and makes one 2x4 every hour, then the cost of that 2x4 can only be $5 cheaper before that lumberjack is getting paid more than the value of his work. And you might say the lumberjack could get paid less, but at $15/hr he already needs to work 4,000 hours before he can afford to buy that $60,000 house (assuming no other expenses). That's two years of savings before he can buy a house, with no money for food, no money for an apartment, no money for a car. If you cut his wages to make the house cheaper, now he has to work longer before he can buy a house. And since no one can afford the house anyway, he'll likely be laid off before he saves enough money because no one can buy the lumber because no one can buy the house built from it. And of course, this is all ignoring that none of these businesses are making any money in this entire hypothetical situation. If we didn't have home loans, the cost of housing would go down, but it would still be completely unaffordable without a loan even if the builder was losing money.
  - Retric 8y ago
    Rather than paying less per hour or less for lumber people would end up with smaller homes. A 40k down payment on a 200,000$ house already pays for a significant structure. Not marble countertops, but perfectly livable if small. Further, as the buyer would not have a mortgage they could upgrade from a ‘starter’ home. But, only if they actually felt the need and saved up even more cash.
RobLach 8y ago
Historically lenders would lend over collateral, with your net assets being an indicator of your ability to pay them back.
- Spooky23 8y ago
  Now lenders almost have a hybrid model -- they use the credit scoring to allow them to write the loan well over the recoverable value of the asset. When I was buying my new house, I found a lender who was willing to write me an interest-only, 105% LTV loan for the new house while I simultaneously had a mortgage on the old property. The premium was only like 1.5%, and I re-financed in a few months after the house sold.
cesarb 8y ago
> presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? How should it be done? The same way it's done in countries without these entities.
- umanwizard 8y ago
  How is that?
  - toomuchtodo 8y ago
    The below article describes how it's done in Canada, the UK, and the EU. https://www.cnbc.com/id/41498097 https://www.cnbc.com/id/41498097
xamuel 8y ago
>presumably lenders need some way to evaluate the "trustworthiness" of who they're lending to, yea? Well, that's kind of, like, their whole job description. If you can't evaluate peoples' trustworthiness, you shouldn't be in the business of professionally loaning money!

pbreit 8y ago

How would you propose lenders evaluate credit in such a situation?