New Promissory note

[mikecz]

Ok so let me get this straight.

1. I create a new for of currency with my mortgage. Basically I sign a mortgage for 150,000, and boom, that is now currency. (Do they deposit the mortgage or the promissory note, because these are 2 separate things.)

2. The bank recognizes the 150,000 as currency, and opens a checking account in my name, and puts 150,000 into that account. The exchange from mortgage currency to real money occurs here.

3. The bank then cuts a 150,000 check to me, which in most cases are forwarded to the seller. Lets just say for this case I own my home free and clear. So they get the equity in my home by changing the mortgage to a check which they cut.

4. They now have equity, and I owe them lawful money. For this money changing service, they charge an interest rate.

This is where I'm stuck. What gives the mortgage value as "legal tender", or the ability of the bank to simply place it in a deposit account is the collateral in the house PLUS the ability to pay it back. Basically I'm creating money out of thin air by writing up the mortgage and giving it to the bank. What this is saying is the bank shouldn't be able to place it in a deposit account. They should figuratively pull money out of their bank vaults, deplete their cash, and wait for repayment on their note they bought. I get that. But they don't do this. They take the mortgage, and issue you a bullshit bank check, or promise to pay, and keep the mortgage as real cash in a deposit account. The liability, or "balancing" transaction is a liability to pay the check they just cut you. They can sell the mortgage, whatever..

What happens when that 150k bullshit check given to you by the bank is placed in the sellers bank. What does that entry look like.


***Edit Really the correct way to look at this would be if I wanted to buy someone's house. I would issue them a mortgage note, assume legal tender, and they would take it as payment for their house. The seller would then go to the bank, and sell the mortgage for CASH. A direct conversion of legal tender for legal tender.

With the mortgage you gave them a promise to pay with interest and collateral, which is cash in their vaults, a sellable item. For it they gave you a promise to pay, a liability in the form of a bullshit bank check. Thats a pretty good deal for the bank. I gave them an asset/cash or legal tender with interest backed by collateral, they gave a negotiable promise to pay. By the way, they refuse your promise to pay "bank checks" back. You have to give them lawful money.