Friday, September 14, 2012

It's Time to Lock in Mortgage Rates---Long Term

They aren't going much lower.


  1. Question:

    What happens if there's a currency change brought on by hyperinflation(or prior) to the contracts(like mortgages)?

    My understanding is that the gold clauses were invalidated after the gold confiscation in 33'.

    Does that mean the new arbitrary dollar value of contracts gets determined by gov't?

  2. This just bites!

    I spent my potential downpayment on the 3 G's.

    It's starting to look like I will Never own real estate.

    The last two EPJ housing posts keep bringing me back to this thought from LRC:

    The effect of this will be:

    1. Even less saving going on than is happening now. ...

    2. It will maintain the focus on consumer spending rather than investment. The idea is to keep people spending on real estate. Thus, less will be spent on business investment.

    3. People will incur more debt. ...

    Ah well, housing is a liability anyway.


    Congress later reinstated the option to use gold clauses for obligations (new contracts) issued after October 1977 in accordance with 31 U.S.C. § 5118(d)(2).

    The 2008 decision 216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co.[3] established that a gold clause in contracts signed before 1933 was only suspended not erased, and under certain limited circumstances might be reactivated.

    1. No offense, I'm not sure that answers my question.

      In fairness to you, no one might know.

      I'm just wondering if anyone if there is an arbitrary dollar devaluation of the "original" dollar amounts, do contracts get inflated to match the depreciation of dollar value in response to such an action?

      I wonder if mortgage companies write any language in the literal "bible" of loan contracts to protect them from such an occurence(like a gold clause).

      I have to believe in the end gov't favors the banks(mortgage companies) and simply forces adjusted amounts into place. If that was the case, I still wonder if buying a house is smart if you think the currency will "change" in 7 years or less...that could hurt you badly even if you do a 15 year mortgage...

      But on a limited search I can't find any precedence historically....

      I was hoping the brain trust here might have a better understanding of such things or a historical perspective that I can't seem to find currently.

    2. "...the currency will "change" in 7 years or less...that could hurt you badly even if you do a 15 year mortgage..."

      I seem to recall something like that happening in Argentina. It was mentioned on Ferfal's blog. You might want to look there, Nick.

    3. I think the event was called the correlato

      The loans stayed in pesos, the payments were to be made with the devalued currency, a.k.a. debtors got shafted.

      Something tells me the low rates in the unitedstate is cheese in a trap.
      Isn't that what a NINJA loan was too?

      I could be mistaken. It's been a few years since I read about it.

    4. Anon, I found his blog and did a search and found an exact article on what I was interested in.

      Here it is for those interested:

      I think it takes a very balanced approach in terms of pros and cons. In Argentina they were making adjustments to contracts to save banker ass. I suppose we shouldn't be surprised by this. He also discusses how inflation can render you unable to make house payments.

      All in all it's very balanced in its tone.

      Thanks again Anon!

  4. The currency is not going to change, Nick. We will get mass inflation, but not hyperinflation and a currency collapse.

    1. Doesn't currency collapse mean "change"? LOL, I'm not trying to be "smart" about it with you, but I am planning for collapse. I'm just trying to understand the real estate hedge better.

      Faber of course has been recommending it for over a year and I think Wenzel has an interesting perspective on it...I'm just playing devil's advocate and trying to look at the possible negatives/risks versus staying in gold/silver.

      I think Faber is more oriented towards high end property, Rogers farm land....Wenzel is saying even housing if I understand right.

      I just wonder given currency collapse(which is change in my
      estimation) how the contract issues play out....

      I'm also wondering what the potential tax liability becomes in a more dramatic inflationary environment becomes with municipalities scrambling for revenue. I noticed a house I had in 07' tripled in property taxes last year. I'm wondering what the long term potential for this type of this is...


    2. edit:

      Deduct one "becomes" and "this type of this is", change it to "tax liability"

      It's been a long day...

    3. Is change the same as reform?

      You all might want to read this bit:

      Whose Interests Will the Fed Always Protect?

      "... There will still be a currency reform at some point. Then the banks will start over." ...

      The author concludes with: "We will then see if Congress nationalizes the FED. "

      Suppose hyperinflation could happen then?

      Who knows?

      No one does for certain.

      And of course you should keep in mind what The Daily Bell often mentions: order from planned chaos.