As recent events have shown, some of the security promised by major banks and investment houses wasn't everything it was cracked up to be. By comparison, managing your own mortgage note can be safer, as long as you're scrupulous about the legal and procedural aspects of drawing the loan up, setting clear payment terms and choosing a borrower wisely.

It may seem hard to believe that major financial institutions could have gotten it so wrong. Here's why it happened:

Nobody Knew What They Were Selling: The bad mortgages currently poisoning financial markets weren't sold in a lot that was labeled "subprime." Instead, a mix of economists and senior brokers designed complicated investment "products" using state of the art software. As a result, bad mortgages were placed in "tranches" alongside better ones as part of one big investment to make them look safer. What this really did was spread the bad mortgages far and wide under the cover of products with better ratings than they deserved. The actual structure was complex enough that even now, people are at a loss to explain what happened except in very general terms.

It Wasn't Their Money:Thanks to a corporate culture that rewarded short term gains, there was no real motive for executives to really care whether these dodgy investments really worked. They just needed to work long enough to gain value, at which point they could be passed along, like a huge economic hot potato. Even when there were clear signs subprime mortgages were a bad idea, banks kept passing them along in the hope that they would fail in somebody else's hands.

Ultimately, it all boils down to responsibility. The system was set up to pass along bad information and reward irresponsible behavior - and these are the banks you were supposed to trust with your most valuable possession because, well, they were banks.

The Difference with Seller-Held Notes: More people than ever are waking up to the idea that they don't have to let a Markey ruled by "investment products" and "tranches" determine how they sell their own homes. That means taking responsibility for your own mortgage note: who borrows, and how. It may seem daunting, but the beauty of seller financing is that if you decide to simplify things, you don't have to deal with the institutional system to divest yourself of a note you don't want to hold anymore. If that's the case, and you'd like a straightforward payment out of your note, contact us for a Free Note Quote.