We build US economy on mortgage and installment payments.
The business is on down payment(based on credit of customer), which is taking profits ahead of monthly payment. If payment stops, then you sell the house or car again with another down payment.
If you buy a car for $10,000, being used the minute you own it, you can only get $7,000. But if you sell it to someone on installment, you can get a total of $16,000 in 6 years of installment payments. You can pocket any down payments, a few hundred to a few thousand dollars depending on the buyer's credit records. Everytime you can repo the car, you get another down payment.
Houses are the same, commercial banks want 30% down payment, then installment payments. FHA guaranteed mortgage only require 8% down payments. FHA never lost money taking back foreclosed properties, because house values go up in time, rather than going down. Every time you sell the foreclosed property, you take in another down payment.
Wall street should do more installment payments like 401k for mutual funds to make a lot of money? |
