Residential Mortgage: Fill & Download for Free

You don’t say what country you are in, but I suspect that wherever it is, the answer is: quite a long way.Take for example the island of Bermuda. Being a small island with a finite amount of land, the average house price is now 25 times the average annual salary.[1] Twenty. Five. Times. That would be the equivalent of an average house price in the US of US$1,575,000.In parts of Japan property prices are so high that people buy property using 100 year mortgages. The mortgage is passed down through the generations as it takes three or four generations to finish paying for a home.[2]Now, neither of this situations are exactly ideal, and they certainly cause problems. But even then, we don’t seem to be at “breaking point”. So when people in large countries complain about house prices being “unsustainable”, they really have no idea what that even looks like.Footnotes[1] Bermuda's incredibly high Cost of Living[2] The 100-year Japanese residential mortgage: An examination

It is 1844 and a 23 year old Henry Lehman migrates to Alabama from what is now known as Germany, and soon opens a dry-goods store. His two brothers join him and they call this store Lehman Brothers. Over the years it goes into cotton and commodity trading and brokerage.By 2008, 158 years after its founding, Lehman Brothers was the fourth largest investment bank in the US, and had posted a series of record-high net revenues and income.But on the 15 September 2008, Lehman Brothers, holding over US$600bn in assets, filed for bankruptcy, making it the largest in US history.So, how the hell did that happen?Lehman Brothers, in the years leading up to 2008, was no longer a bank. Banks are intermediaries. Lehman Brothers had become one massive undiversified hedge fund, investing in subprime residential mortgage backed securities. While US property performed well, Lehman’s was laughing all the way to the bank, but when it turned, the shit hit the fan.Now, I was at Morgan Stanley working in mortgage backed securities. The person sitting right next to me at Morgan Stanley, covered this toxic subprime stuff.The idea that investment banks were creating investment-grade bonds from junk mortgages, is true. But there was absolutely nothing wrong with that. This has been one of the biggest misconceptions of the Global Financial Crisis.Hear me out. Suppose I tell you that I have 1,000 people that owe me $100, so I’m owed $100k. They’re all in default, but historical data shows 20% end up paying back their $100, so we’re expecting US$20k back. If I said you could take the first $1k from whatever I’d collected you should feel damn confident getting your $1k - you’d be ‘investment-grade’ confident about it.So I’ve created investment-grade debt from junk, and it’s all good. That’s what the investment banks were doing.If investors want to buy investment-grade debt backed by junk mortgages, what’s wrong with it? I mean these are qualified investors, massive hedge funds, huge institutions.The actual problem with these subprime mortgage backed securities was that the rating agencies were way too generous with how much investment-grade could be raised from junk loans. In the example above you’d be comfortable getting $1k from those 1,000 people that owe me $100 each, but not so comfortable with $50k, right? And that was the problem - the rating agencies were essentially saying $50k was investment-grade, not just $1k.I remember, in one of our meetings with one of the 3 main rating agencies, they rightly said they wouldn’t give our client US$1.6bn of investment-grade debt - only US$1.5bn. My managing director shouted “F*** you, you do this we’ll remove you from all our future deals and we’ll put out a press release saying you guys don’t know how to rate f***ing debt.”They caved under the pressure. After all, we were paying their hefty fees. But the ratings they gave were to protect investors.It’s this MASSIVE conflict of interest that actually caused the Global Financial Crisis.But even that shouldn’t have caused Lehman Brothers to collapse as Lehman, as an investment bank, was supposed to package and sell these securities on behalf of its clients - the investors of these assets should have suffered, not the investment banks.So, what was the biggest mistake in corporate history?Richard Fuld, the CEO of Lehman Brothers for 14 years leading up to its collapse, made Lehman into a massive hedge fund betting on these securities on borrowed money. It was good when the securities did well, but when they collapsed Lehman Brothers collapsed with them.And that schoolboy error meant that 158 years of Lehman Brothers came to a crashing end…

As I understand it, the NY charges include at least a couple of things (residential mortgage fraud and falsifying business records to commit fraud) that he was not charged with at all in Federal court, so I’d think at the least those would withstand any such charges.As usual, IANAL.