You should show more respect to what other people do.
You're not the only one guilty of this, everybody tend to overestimate their contribution to the world. How many times did you hear/read about a business guy / manager saying that programmers are a disposable commodity? Saying that "the entire financial industry is ready to be replaced with a lot of very short shell scripts", you are acting exactly the same way.
Did you forgot about the dot-com bubble when the tech industry was the one guilty of being over-rewarded for what was often was no value (pet.com)?
As stated below, your general point is certainly true..
But what is the financial industry accomplishing today that they didn't accomplish 25 years ago? As far as I can see, the most useful innovation has been the ATM machine (which is indeed quite useful). The rest of it? Is the economy running better? Does the financial system allocate capital more effectively? If not, then why are they taking home so much more money?
I'm not going to argue that they're not smart -- they're plenty smart, I'm sure there are a lot of people in finance who are smarter than me. It just seems that those smarts have been applied towards rent-seeking and value extraction rather than "building things people want".
Businesses have far more tools to hedge various risks (FX, commodities, etc) - thanks to the financial sector, Apple is in no danger of dying should the RMB spike.
Retail investors are capable of trading for $8 or less, and the bid/ask spread has lowered significantly.
It's now drastically easier for retailers to sell goods on credit, and it's vastly easier for customers to pay electronically. 10-15 years ago, you couldn't swipe your ATM/credit card at the grocery store.
ETFs are undercutting mutual/index funds, drastically reducing the cost of saving for retirement.
Structured products allow far more people to trade with each other than ever before.
Microfinance [1] is available to lower income people, albeit with relatively high default premiums. (Admittedly, many people criticize this.)
It's not necessarily running better - there have been harmful changes as well. The Intel IPO could no longer happen today, for instance, and in the future far more companies to go public Facebook style than Intel style. But that doesn't change the fact that the financial industry has accomplished a lot.
(Of course, I'm not denying that they also rent seek.)
[1] Maybe "minifinance" is the appropriate term. Payday loans tend to be 10-100x bigger than third world microfinance.
I'll grant you the $8 trades.. but that's not what Goldman Sachs et al are making all their money from. Ameritrade and pals are great but they're not the people sucking all of this money out of the system. I still have no idea how all of the other people who aren't Ameritrade are getting so much money, but I know they are, and I know I haven't seen a lot of results for the broader economy.
Microfinance is a rounding error, and structured products almost put us in the Oklahoma dust bowl about 18 months ago.
... wait, you're extolling the virtues of payday loans? As if loaning money at a high interest rate to financially unsophisticated poor people on bad terms is a new idea?
Actually, Goldman does make money by being a broker. A big chunk of their income comes from this. They also very often take on risk during transactions - examples you've probably heard of include Facebook and ABACUS.
Goldman and many others make money off prop trading. Goldman mostly does market making (trying not to hold positions for a long time), others take longer positions (Lehman, Paulson). They do a much better job of speculation than in the past - as an anecdote, Warren Buffet claims value investing based on technical analysis is almost impossible these days. I.e., there are far fewer undervalued companies than there used to be.
I have no strong opinion on microfinance/payday loans. They seem to fill a consumer need, and as far as I know they didn't exist in the past. (I also really wish people would stop being inconsistent about it - if you think Grameen bank is good but EZ Cash is bad, at least explain why Bangladeshi poor deserve it but US poor don't.)
...structured products almost put us in the Oklahoma dust bowl about 18 months ago.
You'll have to educate me on this one. Structured products cause topsoil depletion?
Well, first on payday loans, I can go either way. Depending on my mood I might call it either an economic service that wouldn't be available under nicer terms, or usury. But I'm pretty sure they're not new, and finance companies aren't making a significant sum off of them (how much money could they possibly be making off of poor people compared to the billions in trading).
RE: prop trading and market making.. now you're getting there. That's where they make all their money, right? Is the economy, say, twice as well off from a financial allocation standpoint compared to 25 years ago? If not, how are the trading desks pulling in twice as much money without being extractors?
This varies year by year. In recent years, prop desks have either gained (Goldman) or lost (Lehman) huge amounts of money.
But this isn't always true. Sometimes services are the big moneymakers. Prime brokerage (allowing hedge funds to outsource their back office) was big up until the crisis nuked many hedge funds, for example. In a good year, classical IBanking (IPOs, M&A, etc) can be big. Big banks run many desks at either a small loss or small profit just for the purpose of keeping the lights on. When the market changes and that desk becomes important, they rake it in.
Is the economy, say, twice as well off from a financial allocation standpoint compared to 25 years ago? If not, how are the trading desks pulling in twice as much money without being extractors?
They could capture a larger portion of the new value being created. Suppose they created 100 units of value in the past, and captured 25% of it. Now suppose they create an extra 50 units of value, but capture 50% of it. Before this change, the banks captured 25 units of value, the world 75 units. After, the banks capture 50 units of value, the world captures 100 units.
As for payday loans, they always existed to some extent (loansharks were always present, as were pawnshops), but they only got into full swing in the 90's. The internet made tracking defaulters easier, competition in electronic banking made the transfers cheaper, and the Clinton-era wave of bank deregulation eliminated many state level interest rate caps (California's was lifted in 1996, for example).
Ok, I hear your argument regarding capturing a larger part of the new value.. my sense is that they've gotten a lot better at capturing value and are providing very little additional value. I mean I don't live in the finance world, but in my world, the price of anything does not matter within less than a second ever. And it probably doesn't matter within a minute or an hour either. Commodities probably don't even matter within a week or so. No corporation purchasing a large amount of commodities can turn around a decision in under a week, so who cares if they have subsecond pricing accuracy?
Then I talk to friends who work in finance and I see that insane amounts of resources are being thrown into this stuff. Like, truly insane, you're in this industry, you've probably seen it.
Apple makes an iPad, they get money, consumers get iPads.
Goldman makes a subsecond trading system, they get money, consumers get... ???? If consumers and non-financial businesses don't care about the price of AAPL stock within a second or a minute, then how come Goldman makes so much money creating that price stability? What is broken here? It seems like a tail wagging the dog scenario to me.
Goldman makes a subsecond trading system, they get money, consumers get... ???
Smaller bid/ask spreads, greater liquidity.
Of course, HFT is just a high tech sideshow to the rest of the market. It's not anywhere near as big as you think. Do some simple math - multiply daily share volumes (here is NASDAQ http://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSummar... ) by the fraction of trades done by HFT (estimates range from 25%-75%) and multiply that by a typical profit of a tenth of a cent. You don't get a huge number.
Well, we've been through this before.. but I still don't understand, who cares about smaller bid/ask spreads for their own sake? Say HFT was unilaterally banned (which would be ridiculous and excessive), and now bid/ask spreads will naturally spread apart for maybe MINUTES at a time before someone notices and arbs the difference.. how are we worse off?
My major beef here isn't people making money for doing stuff I think is useless.. I think Us Weekly and People Magazine are useless but I don't begrudge the editors their paychecks. My beef is how much talent is being sucked up into a game that doesn't seem to provide any outside benefit. If all of those people were building actual products and services that people paid for (as opposed to basically hacking the finance system for profit), I feel like the nation and world would be a lot better off for it. In short, I think it's a market failure that they can make so much money without actually creating anything.
Assuming that by "HFT", you actually mean all sorts of algorithmic trading, we are worse off because we have humans doing the work of a computer. If all computerized trading were slowed down by a constant factor of 1000, the world would never notice and HFTs wouldn't care.
But I don't agree with you that the majority of the finance industry falls into that category. Most trading is not a race. HFT is not representative of the financial sector. The entire HFT sector is only about $20B, which is a little more than double Goldman's profits last year.
It's now drastically easier for retailers to sell goods on credit, and it's vastly easier for customers to pay electronically. 10-15 years ago, you couldn't swipe your ATM/credit card at the grocery store.
On the flip side, credit cards are currently riddled with serious, yet solvable security problems. Identity theft is one. ATM skimmers is another. There are also pretty grim privacy implications to the way things work. Finally, banks used to do some rather ridiculous things with penalty rates and fees until they were prohibited by law.
This system probably did people some good in the 90s, but right now it seems inefficient and dated. I believe that with modern technologies it's definitely possible to create something much better.
The existence of a technical solution to a security problem doesn't mean that it gets implemented in practice. Sure the security issues are theoretically solvable, but that means nothing when you're talking about a system with hundrads of millions of users. Aside from issues of magnitude, the financial incentives are all wrong if the goal is to have credit card companies implement the security solutions we would like. Currently financial instituions implement whatever security solution is financially optimal, taking into account the cost of a breach (reputation, customer satisfaction, impact of future sales, etc) and the cost of implementing the security measures. If you want something more than what the credit card companies are already doing, you need to lobby for increased regulation or financial incentives in terms of fines.
Very true, but let's not belittle their innovations due to the problems that came with them. All new technologies will introduce unintended consequences in spite of the efforts of the inventors and innovators to provide something good. Cars were lauded as a clean invention because it stopped horses from leaving their crap on the roads. Nobody realized that air quality would suffer. All technologies and innovations will have unintended consequences that come out of left field and nobody would have predicted. Who at the early stages seriously thought that they'd cause people to have email overload and issues with spam from the invention of email? They were creating a new communication tool, like the phone, but in many ways more flexible and better.
I think the answer to that is they've made it a lot easier to borrow a lot of money very cheaply. I'm pretty sure when my parents got a mortgage 25-some years ago, the interest rate was around 18%. I wouldn't be able to afford my house at that rate. I'm sure this same cheap money has helped finance many people who build things, then helped them set up plants in China and Mexico as well.
Whether cheap money is a good or a bad thing in the long run, I guess that has yet to be seen.
Banking innovation did not solve your parents 18% mortgage problem. Interest rate is mainly based on the economic situation and government manipulation.
Well, mortgage interest rates are based on inflation plus a couple points so the bank still comes out ahead. In the early 80s, inflation was around 10-15%, hence an 18% mortgage. Now, it's more like 3-4%, hence a 5-6% mortgage.
Maybe they've made some bookkeeping and overhead improvements that allow them to add a point less or something like that, but it's not like they had some genius idea that allowed them to lower from 18 to 5.. it's just tracking the inflation rate. (and/or the fed funds rate which is related to inflation).
(Side note: my ATM snark was stolen directly from Paul Volker, who was the guy who stopped inflation in the late 70s early 80s by jacking up the fed funds rate. Credit went to Reagan of course. Better hair.)
Rates are not directly dependent on the inflation rate. Yes, in the real world they are, but the Fed can set them wherever they want and have been doing that.
In fact, the lower the rate, the more we all borrow and bid up prices for things. Most of that inflation since 2001 has been in things that the government likes to overlook, such as oil and housing. But the inflation does actually exist, whether they wish to ignore it or not.
Going to market rates would go a long way to fixing the distortions, to be sure. But many things would not survive in that environment and have only been viable because they've been able to shift the true cost via inflation to the larger economy.
Your parents home is also probably worth 5-10 times what they paid for it. Housing prices increase as interest rates decrease. Homeowners are still paying the same monthly bill (adjusted for inflation) but they're just paying more for the house vs. interest.
This is also why banks pay such poor interest rates on savings & CD's. As the cost of money decreases, so does rate of return on other banking products.
The consumer financial industry is incredibly regulated. Think how many permits you need to open a bank and then think how many you need to create a website or start a tech company. I don't think it's fair to compare it to software or many other industries.
I wasn't talking about how regulated they are, I was talking about how much of their paycheck is due to value extraction vs creation.
As far as how many permits you need to open a bank, the answer is "a lot less than you did 25 years ago", due to continued lobbying pressure. I'm all for phasing out obsolete or poorly considered/implemented regulations, of course, but it seems that the regulations everyone wants to get rid of are those that limit risk. So they can be more "dynamic" in their search of profits. Then when they go belly-up, we're stuck with the tab.
Buddy of mine estimates that he was personally responsible for a fraction of a % of the housing meltdown. He got out in 2007. Hasn't had to work since then. Good thing regulations didn't stop him from making all that money while the getting was good :)
Sorry, but I'm not going to show any respect for an industry that drove off a very predictable cliff, and what's worse is still in denial about their losses.
Call me once they accept that they made millions of loans they shouldn't have made and accept that the losses are as much theirs as the homeowners.
And when they follow their own damn procedures, which they're still showing no sign of doing.
That's a good point, but for me at the time, I did not know how to short. All I knew was that I should save a third of my paycheque so that, when the crash comes, I have money with which to buy a house at a much cheaper price. (By the time the crash came, I sunk all my savings into my start-up, but that's another story.) At the time, this everyone else thought this was madness because money had to go on a mortgage now, before prices rise yet again.
So my error was not that I was full of it, just that I lacked the financial knowledge to maximize the benefit of the money that I had used to support my bet.
There are many brokers that will show you what you need to if you want to bet the economy is about to go bust. You can short, buy options, buy bonds, etc. If you truly thought it was very predictable then it wouldnt have been difficult to get those money hungry bankers to show you what to do. They'd even teach you how to bet their own bank would go under.
I'm glad you didn't fall into the short selling trap.
It's not about predictability, it's about timing!
Pretty much everyone except Wall Street and Washington knew by the middle of 2008 that bubble is about to burst. Of course very few if anyone predicted when exactly and to what extent it was going to happen. I got burned by mistiming my short and underestimating how devastating the crash will be.
Think about what you're actually saying here. If pretty much everyone knew then 401k account holders would've hedged their bets or moved into safer places. Instead they took a bath with the rest of the economy.
Your 20/20 hindsight vision is amazing. I can't wait for you to tell me who will win the 2008 superbowl.
knowing something doesn't mean it's immediately actable upon.
I stand by my claim that pretty much everyone knew by the end of summer of 2008 that bubble was deflating.
Hedging can turn on yourself. Southwest was very successful at hedging rising oil prices until they weren't rising anymore, then their hedges almost bankrupted them.
My excuse was: it wasn't clear how to, there's always a timing issue (it's not necessarily enough to know it's inevitable, you gotta know when), and it's hard when you don't have a lot of other people's money to play with.
The answer to how it was done is in Michael Lewis's book, The Big Short. After learning how that guy did it, I don't feel so bad for not figuring it out.
"Markets can remain irrational a lot longer than you and I can remain solvent." Seeing a company get itself into severe trouble doesn't guarantee any particular effect on its share price, because the only connection between the two is investors' faith that some connection ought to exist. Shorts are betting not only when the price will drop but that no manipulation will occur at that time, and when a company is "too big to fail" and will attract government intervention it's exceptionally risky.
Very good point. You also may not have had the means to do it even if you had the knowledge. But how about at least show a post from 2007 or before that confirms you knew these clearly predictable events would happen.
My frustration is with someone claiming that they knew or that it was very predictable when they were simply WORRIED it would happen. Many of us worry about a lot of things. That doesn't mean when something finally goes wrong we get to say "see? I knew it would happen."
You need to stop ignoring the massive amount of lies and fraud that was going on. Entire companies knew they were dealing with fraudulent/extremely risky transactions, yet no one wanted to be the one that stopped the buck. Not even ratings agencies, who's job it was to oversee the quality of these investments piped up when they knew that what they were rating as AAA was really garbage.
That was about a 1.5 years before the $%$% really hit the fan. There are other e-mails floating around with investment brokers gloating about selling off "pieces of $%$@" to people. They knew what they were doing & profited handsomely from it, they have yet to really pay any price for it.
You're claiming it wasn't "predictable", it was indeed predictable. Perhaps not on "main street", but the perpetrators(large chunk of wall street) knew what they were doing and didn't speak up about it because they were too busy profiting from it.
I always found the "I don't want to profit from this" kind of cheap and rarely true. I don't see the moral problem with profiting off of banks over lending and making risky bets. If you do have a moral problem with this then you can setup a charity with proceeds going to a worthy cause.
Or do you also have a problem with giving money to the needy?
I've read a complete book in 2006 that predicted it all from a well known Banque de France economist. It seems that those worth their salt predicted it, but nobody was interested in hearing it coming.
The biggest beneficiaries of the tech bubble were the investment banks who set up IPOs for a considerable fee and a chunk of equity, that they then flipped. Some tech people incidentally got rich, and that's what everyone remembers.
In a larger sense, it's true that essentially all programming jobs could be outsourced. The fact that programming jobs are vulnerable to this and executive jobs aren't is because those executives have much more control over money, and a larger supply of it. This will not be true forever, and you are slowly going to see the financial industry leak out of New York into other parts of the world, where people will do things like replace mortgage agents with small shell scripts.
Just because something is true today doesn't mean it will be true forever.
Your general point is true and worth repeating but that's a very weak example: pets.com and the rest of the bubble companies were overhyped by speculators for business reasons and failed for reasons which have very little to do with the technology which they happened to use. In that particular example, having had some professional interactions with some of their senior web developers makes me inclined to say that they were if anything tech-starved rather than dominated.
> Did you forgot about the dot-com bubble when the tech industry was the one guilty of being over-rewarded for what was often was no value (pet.com)?
You forget that while tech entrepreneurs made some money in dot-com IPOs, the financial industry made an absolute killing.
You also seem to imply that everyone is rewarded according to the value they add, leaving out the possibility that a group of people get together and form a de facto monopoly, which is somewhat reminiscent of the big players in the IPO industry.
While over-reliance on Excel spreadsheets does hurt day-to-day operations, it didn't cause the meltdown of the economy. That was caused by either not understanding that certain factors existed, or ignoring them despite what their analytics said. Software can only produce data according to the models that exist, rewriting them in C isn't going to cause someone to have some big insight about how the economy works.
Oh yeah? And who will write the shell scripts? And I can't imagine what a shell script which could properly model the convexity of a basket of mortgages would look like. Or for that matter I'd like to see a shell script execute an IPO, or advise on a buyout, or hedge a company's inflation exposure.
I'm actually shocked this extremely ignorant, flame-bait comment has got so many upvotes on a site like hacker news which, in theory, is supposed to be a community of pretty smart and educated people.
"The Securities and Exchange Commission is proposing two new disclosure requirements for offerings of asset backed securities. See the RevisedRegAB site for details on the proposal."
I wonder how much longer realtors and mortgage brokers will be able to charge their hefty fees, once it is understood that house prices may stay the same or even decline during the next several years (at the least).
Would you pay 6% over and above the price of a new car, to the car salesman as his fee?
The car salesman already makes a decent commission, but it's built in to the offered price of the car. With a house, the homeowner usually decides how much they want, and the agents' commissions are added to that. This all happens in the background with cars.
the funny thing is that already much of what they "do" is done by automated software. picture millions of processes looking for opportunities to buy low and sell high, and you're not too far from the truth. speaking in general terms.
I'm actually more impressed that the courts, even locally, didn't try to stop him from pressing buttons and ruffling feathers. Bravo to the entire town.
Wait.. I am new to all this US legal stuff. So because bank did not response to his letter, sheriff put bank building on sale? or I misunderstood article?
I found it rather confusing as well. As I understand it, this is how it went down:
1) He made a "Qualified Written Request" to Wells Fargo (W.F.). I don't know exactly what the request was for though. Presumably an explanation of mysterious charges from W.F.
2) W.F. failed to acknowledge within 20 days and/or act within 60.
3) He filed a suit in small claims court regarding this failure to respond and won by default, since W.F. failed to show up in court.
4) W.F. failed to pay the judgment (?), so he went to the Sheriff to have them place a levy (fine) on Wells Fargo via (presumably) their property.
5) W.F. fails to pay the levy (??), so the property is put up for sale by the Sheriff's department.
(I put question marks in all the areas where the article isn't clear)
I believe they did pay the judgment but didn't rectify the original QWR request. I still don't understand how that allows him to foreclose on the property though.
A levy is a legal procedure. It is the act of seizing property to pay for a debt. Wells fargo didnt pay their legally obligated debt to this man, so he used that (levy) legal process to go after their local office. It's very odd, that's why it's a popular story
It's not popular because it's odd, it's popular because these types of freak situations happen to regular old homeowners all the time: http://www.jpmorganchase.com/corporate/Corporate-Responsibil.... Only this time the tables have turned and it's the bank that is getting foreclosed on.
If your house is being foreclosed upon, look into filing a Lis Pends, foreclosurefish.com has brilliant information on the process, Filing that prevents most buyers from making bids on the house while you sort out your case. Always save all of the paperwork you get from your mortgage company, Hire a lawyer, don't file for Bankruptcy, Bankruptcy lawyers will tell you that's your only option because they want your business, but that will put you in financial jail for years! A lawyer can work wonders if they know what they're doing, and they can also get your legal fees back. Its rough to get laid off, but if you take hold of the situation, work on being marketable for a job, and educate yourself about foreclosure, you'll recover.
What does "forecloses on [an] office" actually mean? The article didn't explain that to me.
From what I read, it sounds like the guy just won a court claim in local court against WF, and got the Sheriff's office to concur that the company was somehow in the wrong. I thought foreclosure was repossession of a house when the borrower is in default?
Wells Fargo failed to pay the damages levied by the court. You can't just lose a court case and not pay, not if you have assets at least. The Sheriff is taking possession of their assets (the office) and selling them to pay the claim.
I don't know exactly how it works, but I had an uncle who had a large boat, and was short around $10,000 on a bill to the yard it was located in. The boat was worth around $80,000. He couldn't pay the last bit of the bill (well, $10k worth) and the yard foreclosed on his boat. It ended up being sold for around $40k. I'm not sure if the yard got its $10k and my uncle got $30k, or if the yard got $40k and he got 0.
I do know that my (other) uncle owns a car repair business and has the towing contract for the town police department. Whenever they tow abandoned cars, he charges a daily rate. If no one steps forward to pay the bill, at some point he can get the title for the car and own it. You would think people would claim their cars, but in a lot of situations there is evidence in the car (drugs, guns, etc) that the police take and then he ends up with a car on his lot nobody wants to claim. Six months later, he forecloses on it and ends up owning a car. Sometimes it can be a really nice car too.
So foreclosures/seizures/liens are not always banks evicting families that are late on their mortgage, I just don't understand all the details.
This is a matter of statistics for Wells Fargo. Of all their clients, maybe 1% do protest. The other 99% just go to the bank and pay the fees.
Maybe the other 99% doesn't even read the statements and just go and pay.
For them, it's all profits. Even paying this man and their attorneys to get to a settlement doesn't make a dent to the revenue they're receiving of the other 99%.
--snip--
He learned about RESPA which allows a Qualified Written Request (QWR), a letter that a loan holder can send to their mortgage servicer who is legally obligated to acknowledge within 20 days and take action within 60
--snip--
I think I don't quite get how the mortgage system works in the USA. In Australia it is fairly easy to go to a competing bank or other financial institution if you're unhappy with you current lender, discuss the terms and maybe get a better deal, get a loan from the new lender and pay out the outstanding loan with the previous lender. You may have to pay some fee for paying out your mortgage too early, but it's usually not that huge.
Yes it is possible, and it is just as easy. It works in much the same way - there are differences between the two countries - but the option of refinancing your loan is pretty much the same. In both instances you'll be up for fees for breaking your old loan, and up for fees for originating your new loan.
What's more likely is that due to changed circumstances this guy wouldn't qualify for his loan again. So while a bank can't force you to leave because your credit situation has deterioated, you are effectively locked in because another bank wouldn't want you. The same can happen in Australia (and will probably be happening in increasing amounts in the coming years).
I have built software for American mortgage lenders and Australian mortgage lenders (and UK ones, for that matter). The three countries have very similar systems, although the USA has a much wider variety of product options, the laws around originating and terminating loans are pretty similar. This is not surprising, all three countries have laws evolved from the same system, and mortgages are a very old legal construct.
A deteriation in his credit might be : loss of job, reduction in income, another loan default (say, car loan or credit card) or the value of his house being less than the mortgage (most likely I would guess).
In effect he just wants the mysterious charges removed so he can manage his budget. As long as you're paying your mortgage the bank can't touch you. In reality Wells Fargo are probably trying to get him to leave of his own accord.
Usually possible, but fairly expensive. Mortgages, at least here, are generally not terribly simple... Loan origination fees, inspections, in addition to possible early payment fees... usually several thousand dollars, depending on the size of the loan. Also, many homeowners over here (probably including the guy in this article) are underwater; that is, they owe more on their home than it's worth, making it pretty much impossible to refinance.
A few years ago, he opens his mail to find a notice that his premiums are doubling, requiring a $1,000,000 insurance policy in the event the home is destroyed and needed to be rebuilt.
This sounds like a mortgage rate increase is in turn requiring a larger insurance policy. Honestly it's hard to parse that sentence in a way that makes sense to me.
I thought it was probably due to increase in premiums on the Homeowners' Insurance policy which is required by the lender, so that they would not incur the loss in the event that house (on which the lender has a lien on until it is fully paid for) is destroyed by a fire or some other damage. Many borrowers contribute to an escrow account (maintained by the lender on the borrower's behalf) which is used to pay the insurance premiums and also property taxes. When the insurance company decides to increase the premiums (which happened to me last year), the lender would notify the borrower to contribute more to their escrow account.
I am not sure if that's what happened in this case, but it does make sense to me.
I can't resist it. I know pedantry is to be discouraged here, and I apologise in advance. But...
"a century old 6 bedroom 3 bath Tudor home"
grates against the part of my mammalian hind-brain responsible for breathing, basic motor control and throttling estate agents. Downvotes will be sadly accepted.
Exactly. In houses over a 100 years old (actually in houses built before widespread electricity), most of the bedrooms were only big enough to accommodate a bed, a nightstand and a chair.
My house was built in 1905 in a mining community. It was 2 bedrooms originally. A queen bed wouldn't fit in either one. We ended up combining them into one decent sized bedroom.
Before electricity, there was nothing else to do in a bedroom besides sleep. No sense in making it bigger than it had to be.
I had to remove part of the door frame of the stairs just to get some furniture the stairs of my 100yr old home. It was definitely not built with future large items in mind.
The door thing ended up being kind of cool. We did it in a way that it reattaches almost seamlessly with some sunken screws.
So, it looks just as bad as it ever did except now it's convertible. We can remove the door's roof anytime we want. At least moving the bed back downstairs when we move in a few months will not be as big of a hassle.
The home is charming but I can't tolerate the neighborhood any longer.
Time to work on the resume and work on getting back out to California.
My point was nothing to do with size or value! Oh dear, my pedantry has been misconstrued. My point was the conflation of hundred year old and "Tudor". I am not one to sneer at anybody for their scale of home, and indeed wish this chap luck.
Haha, yes I am. The point was, as I admitted, pedantic! It perhaps seems rather more amusing to a Brit, where 400 year old houses, though not common, nevertheless are around. A house here described as Tudor is, more likely than not, actually Tudor. Much unkind amusement is also often expressed over here at statements from Americans such as "it's so old! Over 100 years!", but that is simply an old saw. As I say, people missed my point a little, which was out of place snark (though I hoped it would raise a smirk with some). Sadly I learn my lesson! :)
True, in American real estate, Tudor is about as meaningful a word for a time period as Pleistocene. You probably should have tagged it as Brit pedantry, we're used to not getting those jokes. :)
Or the somewhat used Faux-Tudor. I don't think modern "Tudor" houses engage in wonderful building materials like daub wall plaster made with urine and other "fancy" stuff.
What are you talking about? And how does it matter to the story? The guy found a way to stick it to the man, with no prior training in law.
I think a demonstration that you can do today what was unthinkable a little more than a decade ago is a point well worth reading whatever you don't like about the home description.
I know what you're going for, and while you're probably a little unfairly downvoted and most people didn't get your joke, I think you should know that there are homes referred to as Tudor which weren't built during the Tudor era of the 1600's.
1500s, surely—James I was crowned in 1603, thus inaugurating the Stuart period. If one wanted to be especially fussy, one might identify the Tudor period as starting in 1485 (when Henry VII was crowned King of England following his victory at Bosworth, and the end of the Wars of the Roses—incidentally, the last to win his throne on the field of battle) and finishing in 1558 with the ascension of Elizabeth I, her reign of 1558-1603 being known as the Elizabethan era.
It seems to me that their value add is negligible compared to how they're rewarded.