View on mort-gages | hypotheken

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Mort-cages in te Netherlands: Dutch Douleur?

In the Netherlands a greater part of the households had financed it’s house with a mortgage (‘hypotheek in Dutch’). The Netherlands is one of the countries with the highest national mortgages debt in the world.

A reason for this is that the Dutch people (who have proven themselves a world leading financial engineers (*)) created all kinds of regulations via which house prices got boosted. Or in financial terms: ‘leveraged’ or ‘hedged’. Tax reduction up to 50% on interest costs is one of the most important ones. But more recently it was decided that money could be given to children tax free as it was used for buying a house. The terms ‘leveraging’ and ‘hedging’ are words used for financial derivatives like options, futures, etc. This is a world which the common people does not know about, or does not want to know about, or does not understand. At the same hand, this world is a bomb lying under schools, hospitals, energy services, food supplies, etc. During 2007 and 2008 this bomb exploded for a first time globally. The counter measure by steering institutes:  ‘print’ more money and buy out banks. In the basis nothing has changed. And cannot be changed unless we decide to phase out the nowadays banking system, which has its income mainly based on the provision of loans (interest division) and thus mortgages.

(*) The Dutch people  also had a main part in defining the free trade-able stocks, now resulting in things like hedge fund ‘hurricanes’. The good side: I strongly hope the Dutch people will start to use their financial genius to create financial products which are healthy for humans, climate and nature. They feel certainly capable for this. And than start to export these new financial concepts to the rest of the world.

For me this subject feels ‘highly alive’ still, because I worked in the field of banking and mortgages administration before 2008. And in 2007 / 2008 I took a mortgage myself, and got ‘burned’ in the financial crisis in which also two major Dutch banks might have gone bankrupt if the Dutch State did not buy them. After 2008 many Dutch house holds (more than 100.000) saw their mortgage loan rising higher tan the price of their house. Making their house instead of a place of freedom and joy, a place of being locked in and hell. And remember the Icesave bank bankruptcy? I read quite some articles of people deciding to end their lives instead of living with the loss or even worse: debt.

Now it is 10 years later, many people seem to have forgotten this crisis and many politicians, economists and bank directors say the crisis is over. Well, it seems more likely a far deeper crisis is at hand. And the more we prepare our selves, te more likely we can get over it within some years.

And with some fantasy… the word ‘Mort Gage’ sounds like ‘Mort Cage’, or a death coffin. This could become the case for many (and it already has), if we don’t take precautions.

Warren Buffet once said ‘derivatives are financial weapons of mass destruction’. Which makes me wonder: Nuclear weapons we ban, financial equivalents we even support. I hope soon political parties start to share the vision that financial derivatives (like mortgages) are disruptive for society and should be phased out.

A possible solution for Dutch housing market and mortgage jam – Dismantling a financial atomic bomb

And than… how can we get rid of the multiple hundreds of billions debt in Dutch housing marker.

After much modeling and talking with visionaries I come to a simple model like this:

  1. House relief funds: We establish as society several house buying funds (house price neutralization: taking care that house prices do not drop to sharp, and helping people out of their debt, pressious situation).
  2. These house relief funds offer the possibility for house holds to buy their house for the sum for which they bought it minus 10% (so if the house cost 200.000 euro’s, it is bought for 180.000 euro’s). The remaining 20.000 euro’s  feels like an amount what mostly can be taken care of in a personal social context via (interest free?) loans or gifts.
  3. People can remain to live in the house. As as balancing they pay a monthly sum of 400 euro’s (being 40% of Dutch social security / eg. unemployment). This amount of 400 euro’s can be lowered as soon as the buy-out funds don’t need additional funds and can lower these payments.
  4. Keep it small but in a grid: To avoid the same mistake of creating house hold corporations molochs  (many people, much overhead, etc.): create Legal vehicles which hold the properties, but not for more than say 20 houses. These legal vehicles are only ‘allowed’ to hold property, not to ‘drive a company’: hiring people, being a contract partner, having a bank account, etc. The people connected to the houses in such a  ‘house holds holdings’ legal vehicle organize maintenance together via a council fashion.
  5. People can leave their houses whenever they want after the ‘buy out’, new house hold people can take their place under the same conditions. Crucial in this transition philosophy is that they first ‘tune in’ the specific habitat. And for instance first do a three months during try out, to see if they fit with the other peoples (social-affinity principle).

In such I believe we can undo the ‘damage done’ within 80 years. And ‘demoneytize’ our houses, and create a far more fluid and a-tuned society.

PS: Many Dutch readers might say something like ‘but we have the NHG’ (National Mortgage Guarantee). What most people don’t know is that this NHG facility helps the banks, but not the people: It makes sure that interest remains paid to the banks if somebody cannot pay for it anymore. But the remaining debt is not taken care for. The reality is even worse: In the USA it seems to be the case one can just send the key to the bank, and the burden is gone. In the Netherlands the house is gone (foreclosed / executed) but the debt remains, life long in potentially…