Skimming

You’ll notice they’re both wearing suits… that we paid for.

All of the names related to today’s learning have been redacted, because it’s just too much to deal with. And really, the specifics don’t matter. It’s the pattern. Always look for the pattern.

Nora and I just refinanced our home loan, taking advantage of lower interest rates. We always prefer to do business with people and groups we like, rewarding them for their prior good work, attempting to build a longer relationship. So we used a mortgage lender affiliated with our retirement investment company.

You know what? It’ll be simpler if we just use letters.

We have our retirement accounts with financial group A. They have a division (A1) that does mortgage work, so we used A1 for the refinance. At the closing, we discovered that A1 had already transferred ownership of our loan to mortgage lender B. We hadn’t even signed the closing documents, and there was already another partner in the deal.

Before we could even make our first mortgage payment, we learned that Fannie Mae (C) had bought the loan from B, so that B could have more money to make more loans. That’s what Fannie Mae is: a liquidity engine that lets banks keep lending the same dollars over and over without having to be big enough themselves to cover it all. But B will continue to be our “mortgage servicer,” which means they’re handling the bookkeeping of our payments and the escrow for taxes and insurance, so even though we bought the loan from A1 and it now belongs to C, we pay B.

Good so far?

So we called B today because we wanted to clarify a small inaccuracy in the property taxes, and we were told that the tax component of the escrow payment was only an estimate, that B would pay the actual billed amount of tax, and that we’d re-balance the escrow account when the annual tax rates are recalculated next summer. B uses a different company altogether, D, to actually make the phone calls to county offices and insurance companies to verify actual rates; according to our very nice customer service rep at B, all the mortgage lenders hire D to do this for them.

For every transaction, so many people in line with their hands out, demanding their vigorish to organize the game. Every time you spend money, there are invisible people skimming their percentage to lubricate the proceedings.

When a farmer sells milk, they don’t get the $4.50 per half gallon that organic milk costs in the supermarket. The farmer sells it to the coop for processing, who sells it to a packager, who pays a distributor, who gets it into the grocery store. And each of those intermediaries gets paid. The farm price for raw milk in Vermont is about a sixth of its final retail value; about 85% goes to all the others in the sequence.

I was corresponding with a friend who’s an adjunct college teacher. She told me that she was finishing a twelve-week graduate writing course for eighteen students, a course for which she’d been paid $2,000. So the teacher’s cut was $9.26 per student per week. Each student was getting a rich and closely personalized intellectual experience for about the cost of a mocha frappuccino and a pumpkin scone plus tax. She should have a tip jar.

The school charges each student twenty-six times that much, just so you know. Or, to calculate it a different way, our beleaguered teacher receives 3.8% of the total tuition for the course.

When you buy a $28 hardcover book, the author gets about $2.25. (And then subtracts 35 cents for her agent.)

When you buy a pound of Rainier sweet cherries for eight bucks at Whole Foods, the field picker got twenty cents.

It’s really astounding how many people have their hands out, and how little of the final take actually goes to the worker. We support all of those invisible skims every time we offer our labor in the marketplace, and pay them with every transaction.