man reading mortgage headlined newspaper


“This is the relatively sudden withdrawal of substantial sums of money from savings and loans, banks, etc.” It could be an interesting number to watch in the coming months.

Disintermediation occurs when inflation rates are high and bank interest rates are stagnant. The depositors believe that they can get better returns by investing in mutual funds or in securities.

When interest rates start to rise, the investors return to their role of depositors and re-intermediation occurs. Gmail does not even recognize this word. We are supposed to be able to recognize movement of the economy by watching these two rates; easier said than done.

Reminds me a little of Paul Volcker, the Fed Chairman in the 80’s. He watched some type of money supply and made his decisions. The prime rate went over 10% several times and even to 20% at a peak. When interest rates are 16 to 18% on single family homes, it is rather tough to sell them.

Even if you find someone who wants to buy, it becomes impossible to qualify. That is when we will hear words like seller-carryback, wrap-around mortgages, AITD’s, subject to or assumption, builder lending, acceleration or alienation, five year lease with option to buy, equity share, etc. etc. etc.

These changes that we are experiencing now are not originals. I have observed similar problems in the late 60’s and early 70’s, 80’s and 90’s.  The most severe situation was 2008’ish. That last one was about 10 years ago, Interesting.

Hey, you people over 62, you might check a Reverse Mortgage Line of Credit. Costs a few bucks to create, but it sure would be a savior loan if as my dad used to say, “The market goes to hell in a hand basket”. Never did know what that meant exactly, but I think that it isn’t good. 

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