Medieval Tally Stick Discovered in Germany

Interesting:

The well-preserved tally stick was used in the Middle Ages to count the debts owed by the holder in a time when most people were unable to read or write.

"Debts would have been carved into the stick in the form of small notches. Then the stick would have been split lengthways, with the creditor and the borrower each keeping a half," explained Hille.

The two halves would then be put together again on the day repayment was due in order to compare them, with both sides hoping that they matched.

Note the security built into this primitive contract system. Neither side can cheat -- alter the notches -- because if they do, the two sides won't match. I wonder what the dispute resolution system was: what happened when the two sides didn't match.

EDITED TO ADD (5/14): In comments, lollardfish answers my question: "One then gets accused of fraud in court. In most circumstances, local power/reputation wins in fraud cases, since it's not about finding of fact but who do you trust."

Posted on May 10, 2011 at 1:47 PM • 65 Comments

Comments

BenMay 10, 2011 1:57 PM

Presumably the stick with extra notches automatically deemed to be the dishonest stick, as it would have been one hell of a trick to remove notches.

ErnstMay 10, 2011 1:58 PM

It seems the system was mainly a safeguard for the debtor: the creditor could not add any notches without the consent of the debtor. If he did, the "additional" notches were surely not accepted by the "judge".

A problem occurs though, when the debtor tried to re-create his side of the stick, only with fewer notches. This seems quite difficult, on the other hand, as he would have to find a stick which does not only fit to the notches but also to the structur of the wood etc.

Paul RenaultMay 10, 2011 2:00 PM

"what happened when the two sides didn't match"?

The side with the fewer notches would win. In other news, archeologists discover what is suspected to be the oldest can of 'LePage Plastic Wood' ever found.

CraigMay 10, 2011 2:00 PM

It's easier to add a notch than to remove it, so the assumption would probably be that the stick with fewer notches was the legit one, as long as nearly all of the notches match up well enough that it is believable that the two sticks were originally one.

Now, what would be interesting is if you tried to substitute a completely different stick and then argue that it was the other person, not you, who is presenting the wrong stick to try to get extra money or pay less. I don't see how that could be proven to an objective third party without additional evidence beyond the sticks themselves.

NachoMay 10, 2011 2:06 PM

But you don't have to recreate the structure of the wood or anything. Since it won't match anyway, the doubt as to who cheated is already there. So the question remains: who cheated?

Maybe if you could have a three-way split, with the middle portion given to a neutral third party...

RyanMay 10, 2011 2:06 PM

So the stick needs to be split into three, with a third party who can read and keep books holding the extra third.

CerebusMay 10, 2011 2:09 PM

"I wonder what the dispute resolution system was: what happened when the two sides didn't match."

You beat the cheater with the stick.

-- C

ArtMay 10, 2011 2:09 PM

Only the matching marks were considered a valid debt. Presumably, a lost stick would force acceptance of other side's terms.

This protects against tampering by lender or the borrower, but not outright replacement of the stick's half. If halfs don't match at all, the challenge is symmetric.

I suspect in those cases the law favored the lender.

MaxiMay 10, 2011 2:21 PM

I think to remember that the romans paid their soldiers similar for partaking in a battle:
Before the fight, the soldier would break a plaquette in half: one side was kept in a bowl in camp and the other on the man. After the fight, he would come back, put them together and get paid.
I think that system doubled as causalities calculator: the pieces left is the number of soldiers you lost...

JuergenMay 10, 2011 2:48 PM

The stick also is the origin of the term "Kerbholz" in German. As to the dispute resolution system - this depended on who was holding the stick...

bcsMay 10, 2011 3:20 PM

One solution so resolving the debt? The king executes both sides and takes all the property.

At least it's uniformly unfair.

Mike TMay 10, 2011 4:00 PM

I'd assume a severe beating in either case.

But seriously, the side with the fewest notches wins. Good security, and a surprising amount of logic too.

Mike T.

tommyMay 10, 2011 4:02 PM

@ Cerebus:

""I wonder what the dispute resolution system was: what happened when the two sides didn't match."

You beat the cheater with the stick."
*****
My immediate response was that the side with the bigger stick (or muscle, or gang) wins. Maybe that's why U.S. President Theodore Roosevelt’s corollary to the Monroe Doctrine paraphrased the African proverb, "Speak softly, but carry a big stick".

@ Ryan and All:

If they had the tools to split it in half lengthwise (along its longitudinal axis), it could also have been quartered lengthwise. (Fully-circumferential notches, of course.) Then *two* uninvolved parties, perhaps at least one with authority (Judge, King, Chief, etc.), would have had a copy of the original. Collusion then would have become that much harder.

tommyMay 10, 2011 4:09 PM

@ Mike T:

Sorry, we cross-posted. There's still the "attack" in which the lender creates a bogus stick, adds notches, cuts it in half, burns the second half, and then claims that the borrower did that. Without my suggestion above, no way to prove who's right. (An early example of "sub-prime sticking" it to you).

Old saying, somewhat on topic: "The creditor hath a better memory than the debtor."

Captain ObviousMay 10, 2011 4:29 PM

"what happened when the two sides didn't match."

Biggest stick wins! If you're going to cheat, cheat big.

Wicked LadMay 10, 2011 4:31 PM

Bruce> I wonder what the dispute resolution system was: what happened when the two sides didn't match.

When the disputing parties are holding sticks? Need you ask?

(Apologies to Cerebus. I couldn't resist rephrasing it.)

vwmMay 10, 2011 4:41 PM

Apparently, there is also a name and a date written on the stick. If that was written by a trusted (and literate) third party -- e.g. the local priest -- it might be a protection against the stick-substitution-attack (stick-exchange?).

Dirk PraetMay 10, 2011 5:37 PM

@ Bruce

"I wonder what the dispute resolution system was: what happened when the two sides didn't match."

Quite simple: it would lower reputation and trust rating of both among other parties, therefor making it more difficult for them to trade. Folks or organisations known to be involved in repeated disputes effectively drove themselves out of business by being refused credit. Those known for or suspected of regular "overcharging" could end up in court on fraud charges. In general, it was in neither parties interest to have such disputes.

Hugh MannityMay 10, 2011 5:57 PM

When literacy became more common, written contracts, such as apprentice contracts were written out twice on the same sheet of paper, then cut in half (between the 2 copies of the text) with a wavy line.

Each party to the contract kept a half and if there were disputes, putting the 2 halves together confirmed they were genuine as long as the paper cut matched.

This is the origin of the term "indenture" as in indentured servant.

There are still a fair number of 14th and 15th century originals in existance.

Dr. I. Needtob AtheMay 10, 2011 6:27 PM

Do we have a modern equivalent? It seems to me that we should but don't. When a business, especially a large company, falsely claims that you owe them money, you often have very little recourse.

Bruce ClementMay 10, 2011 6:31 PM

@Bruce "I wonder what the dispute resolution system was"

People back then weren't any more stupid than today (less well educated, but the brains were much the same) and there would have been an arbitration system in place.

Presumably smaller amounts would be decided by the village priest or some other trusted arbitrator with larger amounts going to the local courts.

Interestingly enough, the travellers cheque was invented in the Middle ages by the Knights Templar

tommyMay 10, 2011 6:57 PM

@ Dirk Praet:

Thus punishing the honest along with the dishonest, if no certain proof exists of which is which. (Your "reputation" idea had occurred to me, but this was the problem.)

@ Dr. I. Needtob Athe:

"When a business ... falsely claims that you owe them money, you often have very little recourse."

Of course you do. They need evidence to prove the debt, if it goes to court. You need evidence of payment: canceled checks, etc. No one wins a judgment against you by telling a Judge, "He owes us $10,000.00. Just take our word for it."

E. g., in the US, some homeowners who truly defaulted on their mortgages are successfully getting the resulting foreclosure suit dismissed, because the promissory notes and mortgages went through a number of hands during the boom years of 2000-2006. Many were packaged and sold to institutions, or used as collateral for debt obligations. But if an Assignment of Mortgage wasn't duly recorded for each mortgage in the package. it has happened that the Plaintiff (creditor) could not prove successfully that they in fact owned the debt, and therefore had a right to sue for it. Case dismissed, and a deadbeat homeowner escapes via the incompetence of the other parties.

FWIW, I have spent some professional time in areas related to civil litigation over debts, and know whereof I speak. And take a bath. Or stand out in the rain. ;)

Dirk PraetMay 10, 2011 7:23 PM

@ Tommy

"Thus punishing the honest along with the dishonest"

Which kinda happens everywhere and all the time. I'm looking forward to what Bruce will be writing on this in his upcoming book.

Rui MMay 10, 2011 8:35 PM

@vwm

"Apparently, there is also a name and a date written on the stick. If that was written by a trusted (and literate) third party -- e.g. the local priest -- it might be a protection against the stick-substitution-attack (stick-exchange?)."

That would be prone to a MITM-like attack. When you look at a "string", you just need to replicate it to achieve the same effect. You don't actually need to know what it means and you don't even need to know how to write it if you have somewhere to copy from.

I.e: Deni langu fedha!

And I don't know a thing about suaili... And sure you could compare handwriting, but how perfect can the original be, considering you're writing in wood?

LollardfishMay 10, 2011 8:37 PM

Your friendly neighborhood medieval history professor (in consultation with my friendly neighborhood expert in medieval law) says:

One then gets accused of fraud in court. In most circumstances, local power/reputation wins in fraud cases, since it's not about finding of fact but who do you trust.

Erik NørgaardMay 10, 2011 9:27 PM

Without knowing, I'd assume that the two sticks would be same length, and mark was cut off on both sticks when payment was made.

That way, if the borrower cut of a mark the lender would know by having the longer stick, and if the lender added a mark, the mark mismatch on same length sticks would show it. So, now dispute can be resolved as it can always be determined who modified the stick ...

Then of course somebody would make fake copies, longer with more marks for the lender and same length with less marks for the borrower ...

antonMay 10, 2011 9:50 PM

@Dr. I. Needtob Athe
"Do we have a modern equivalent? It seems to me that we should but don't."

We have exchange of contracts or offer acceptance. In either case you can have two identical copies and each party signs both copies. If you need extra protection, get both signatures witnessed by a notary public.

tommyMay 10, 2011 11:50 PM

@ Erik Nørgaard:

There weren't two sticks. There were two halves of one stick. As the OP says,

"Debts would have been carved into the stick in the form of small notches. Then the stick would have been split lengthways, with the creditor and the borrower each keeping a half," ....

@ Anton: I had written enough for one topic, but since you brought up what I would have (notaries), I'd also add that the Statute of Frauds requires deeds for real estate to have also two witnesses, with their signatures also being notarized. Furthermore, most things related to real estate, like deeds, mortgages, satisfactions of mortgage, foreclosure actions, etc., are filed in the Public Records of the jurisdiction (e. g., county) where the property is located.

If it's a credit card company, ISP, phone provider, etc., as you seem to be implying, they still must produce *some* credible evidence of the debt, and of reasonable efforts to collect, at least in the US. Also, US law requires them to send you a periodic statement, often monthly, along with the address to which you may send a written dispute, and the time frame in which they are required to respond to your dispute.

I'm curious what prompted the post. Do you have a real-world example that you care to share, without violating your own privacy standards? ("A friend of a friend..." works well. :wink:) Not saying that no big company has ever been negligent or fraudulent, by any means, but we are not usually without recourse.

Michael BuckbeeMay 11, 2011 12:37 AM

A few people were asking for the "modern equivalent" of the split stick. While they aren't used for debt tracking, the seals used by the IANA to monitor access to nuclear power plants are similar in design.

From: http://www.slate.com/id/2123769/

"Each seal has a series of lines of varying orientations scratched into its inside surface. Inspectors can verify the seal's authenticity by comparing its unique scratches to photographs the agency keeps on file."

Dirk PraetMay 11, 2011 2:38 AM

@ Erik Nørgaard

"Without knowing, I'd assume that the two sticks would be same length"

Er, no. There were two halves of one stick, and from Wikipedia: "Later this technique was refined in various ways and became virtually tamper proof. One of the refinements was to make the two halves of the stick of different lengths. The longer part was called stock and was given to the party which had advanced money or (other items) to the receiver. The shorter portion of the stick was called foil and was given to the party which had received the funds/goods. Using this technique each of the parties had an identifiable and tamper-proof record of the transaction".

PaeniteoMay 11, 2011 3:02 AM

@tommy: "Thus punishing the honest along with the dishonest"

I guess the assumption is that the dishonest one would be punished more often (he is always involved in dubious dealings) whereas the honest is punished only seldomly (i.e., only when dealing with the dishonest). NB: This only works when the dishonest are few...

Think of reputation/trust as a *relative* measure. No need to have 100%.

Clive RobinsonMay 11, 2011 3:30 AM

@ tommy,

"Do you have a real-world example that you care to share without violating your own privacy standards?"

I don't know where you come from but laws are many and varied and all sorts of loop holes exist.For instance in Southern Greek Cyprus, Greeks are taking out court orders aginst people who have legal title to property in Turkish North Cyprus. Under EU legislation once a judgment has been made in one country within the EU enforcment can be sought through the courts in another country. Hence an English couple who purchased a property in TNC found a Greek property tycoon applying for judgment against them simply because the GSC courts believe (incorectly) that it has primacy over property int TNC...

But more germane in the UK back in the 1980's Maggie Thatcher PM changed the law over civil (local) property taxes. She changed it from a per/property and it's adjudged rental value (what was known as "the rates") to the Poll tax based on individuals. The result was the Poll tax riots.

However although the Poll tax element was repealed other asspects of the legislation was not. One asspect was the standard of proof required in court by the local council. The law basicaly says that if the local council produces a computer printout with your details and an alleged debt that this be accepted as proof. The fact that you might not owe the debt and can show so is not in general sufficient in the UK magistrates court to have the debt discharged.

Also in order to save money the local councils hire the court room and do not bother to actually use the magistrates court system, thus they issue their own summons etc (and often fail to send out notification to people that they have started legal action so the first the person knows is they have been found guilty).

Thus quite a few inocent people have through no fault of their own been found guilty, and the local councils usually refuse to sort the issue out. In a number of cases people have had judgment made against them and have then had to wait untill the case moves up to a crown court where the judge (not a lay magistrate) reviews the evidence and (often finds fault with the local council and has the case thrown out).

The problem with having a magistrates order made against some one is that the local councils believe (incorrectly) that the "seven year rule" does not apply, and they are chacing people for supposed debts going back more than 15 years, and as the law has changed attempting to gain ownership of the property via placing a charge against the property title.

In the mean time people so charged get treated in a similar way to those who have suffered identity theft.

And for those seaking to "reclaim their rights" under law the cost can easily excead the value of the property and, even if the do get their rights restored they often do not get their costs back from the local council who will fight tooth and nail to reduce what they have to pay in any way possible.

And although not yet used by a local council (that I'm aware of) there is the dreded "Proceads of Crime Act" (POCA) which is just absolutly awful legislation under which it is almost impossible to not be either guilty or have your "rights stripped".

In some respects England is now more of a "Banana Republic" than many of the Dictatorships and republics in Africa and South America.

Saint CrustyMay 11, 2011 7:28 AM

Obviously this could well lead to a neat cipher protection.

Imaging building a virtual 3D block then fracturing it force, speed, material-index (alice's & bob's) which in turn would compute a virtual fractureline.

Each of the left-overs is exchanged and privately kept with force,speed,material-index.

The spread of numbers in this block would be used with some creative formula to incorporate force, speed, material-index into a usable block-resolution-dependant fracture-line-vector hopefully providing a unique fracture-number for validating the other side.

Well, back to reality. I have no idea on how people would behave. Just like any other dispute where evidence goes missing. Erratic :-)

Tom ZellerMay 11, 2011 8:36 AM

My medievalist friend comments:

Tally sticks:
I used some images of tally sticks in the course I did last year on medieval book culture. They were used in some places until well into the 1800s. There are also paper/parchment versions, torn into thirds as some of the commentators suggest, with a neutral party holding one piece to authenticate the other two.
Plus, a bonus fun fact! Chaucer makes good use of the pun on "taile" (tally / tail) in the Shipman's Tale. It has to do with money, tally sticks, and a woman's ass. You could look it up.

paulMay 11, 2011 10:04 AM

If such sticks are carefully kept, faking one half would be very nearly impossible. Wood fracture patterns are horrifically complex, and match/no-match is obvious.

But yep, in the modern world we've pretty much given that up. And even if a company claiming to be owed money can't make it stick in a court of law, they can do huge damage to reputation (and sometimes property) with essentially negligible liability.

(There have been some cases reported in the US where a finance company, ostensibly believing itself to be in possession of a house, has sent people to change the locks, remove and discard the contents, or even demolish the house. Victims have had to hire lawyers and go through the regular court system in hopes of compensation.)

Jim AMay 11, 2011 10:28 AM

Just a few notes. The patterns of notches could be quite complex. In a world without small change these would have been used for many small transations. For much of the Mediaeval period in England, the silver penny was the smallest coin in common circulation, and that was a days wage for a laborer. So buying a piece of bread might have involved giving a penny to a baker and getting a tally half that would be brought back and marked until the requisite number of loaves had been consumed.

AustringerMay 11, 2011 10:32 AM

Find a third party you both trust and cut the end off the stick at an angle with some sort of reference mark on it. Many of the artifacts brought up with the wreck of the Mary Rose had marks that seem to indicate "Property of...." The ultimate in security, at least for this level of technology (and the people most likely to be involved with large debts, who didn't have an entourage including a couple literate scholars) would be guild members who had their own touch marks for marking their goods with.

With that in place, fraud would also require conspiracy and maybe a skilled metalworker, not just whittling.

kangarooMay 11, 2011 12:05 PM

"I'm curious what prompted the post. Do you have a real-world example that you care to share, without violating your own privacy standards? ("A friend of a friend..." works well. :wink:) Not saying that no big company has ever been negligent or fraudulent, by any means, but we are not usually without recourse."

In the US, small debts such as credit card debts and so forth rarely go to court -- so if you get accused of welching on those debts, the "punishment", a reduction in credit, is applied without many legal protections. Of course, you can dispute the charge with the credit bureaus -- which will only get you anywhere if either the reporter is incredibly disreputable, or it was a simple accounting error such as using the wrong name.

So no -- in the US, often we have limited recourse if the amount is under what is worthwhile to take to court and involve lawyers.

For the mortgage example, if you follow Taibbi reporting on the case which helped lead to the reversal on many foreclosures, there were numerous states where folks basically had their homes taken by corrupt and lazy judicial systems in the US. It was only after journalists became involved and folks with a very good understanding of the legal system and enough money to back it up had their homes foreclosed on, that recourse became possible.

For several years in most courts if the banks had signed on it -- you were shit out of luck. The question isn't whether a theoretical recourse exists -- who cares about that -- but whether there is economically feasible recourse.

kangarooMay 11, 2011 12:08 PM

Oh -- and that wasn't completely OT. What happened when the two sticks didn't match? Well, I'm sure that the stick system was used for small debts where the need for more sophisticated controls was irrelevant -- if you where borrowing a herd of cows, you didn't use the stick, you went to the priest or lord to get the agreement witnessed.

So, dispute resolution? A punch to the mouth or a nasty rumor was pretty sufficient recourse.

Doug CoulterMay 11, 2011 2:24 PM

@ben
Good job getting the humor ball rolling! Can't beat it with a stick (I'm still choking...).

The suggestions of splitting the stick more ways to give a copy to a third party - ridiculous as the whole point was illiteracy, who'd keep track of which stick was whose?

And, how to handle the loss of (or fake creation of) sticks in this system? Couldn't I just make up some sticks and claim you'd burned yours to get out of debt to me? Heck, under the current system the analogous thing is still happening.

Real world examples of companies screwing you to collect debt you don't owe? Puleese, I've got several from dealings with telecoms. Just try to get them off your back even if they've agreed they were wrong, but sold it to a debt collector. Laws are totally, utterly in their favor -- you're assumed guilty by both the courts and the credit agencies till you prove otherwise -- separately to each agency. It will always cost more, even in small claims court, than the debt. And it won't fix your credit, that's another court case you have to get into. They know this, and take advantage, much like the MafIAA does -- cheaper for most to just settle, and not mention it later out of embarrassment you were to chickensh*t to fight the good fight.

What color is the sky on your planet? What a sheltered life you must lead. We are still fighting,
(more truthfully, ignoring) 10 years later, a $1000++ dollar bill from ATT for calls supposedly made to psychics on a data-only leased line! And those guys are in jail for fraud for doing it to thousands of others. Doesn't help my credit rating though. Verizon, don't get me started. And I'm way not alone. Many people in my community were sold their phones by radio shack years before they had any coverage of this area whatsoever, turned them back in, got company apology for selling them something useless, and a promise they didn't have to pay termination fees, but are still getting bills -- years later, from the collection agencies that those debts (so called) were sold to, despite Verizon saying no blood, no foul.

I could go on. As it is, I'm lucky to be quite well off and in no need of a credit rating, so I can easily tell them to buzz off and eat it when they try to rip me off. I just tell my lawyer it's a matter of principle (the magic word$) and would he please call them and tell them so. Usually buys about a year of them shutting up and going back into their troll-holes. Works till they re-sell the fake "debt" to someone else who doesn't have context. After all, most of those debts ARE legit, so you get in with that bathwater...


Doug CoulterMay 11, 2011 2:33 PM

@kangaroo -- yes "zis IS what ve find". And the cool trick is -- among those in foreclosure, who has the money and knowhow to hire a worthwhile legal helper? If you have that money and connections, you'd not be in foreclosure! Game over, they know it, exploit it, and the devil take the hindmost.

Granted, this mostly happens to people who deserve it one way and another -- there are examples in my neighborhood where say a part time teacher managed to get 500k into debt to banks to build herself a dream house, then another 70k in debt to neighbors before she skipped town, having figured out how to work the system to have at least one year in her life of "the good life" that we're all supposed to get in "The american dream".

But assuming everyone was "one of those" would be sadly incorrect. Thank heavens I'm not the one who cleared out her credit card debt so she could run up another 100k or so before skipping town (she was "hot" and someone else bought into that one).

And this is a small town. Dishonest people don't usually do well around here, everyone finds out too quick and refuses to deal with ya. I can imagine it's much worse in dense areas.

MeMay 11, 2011 3:36 PM

seems that then, as now, the solution is a simple, two parter... don't cheat & "owe no man".

tommyMay 11, 2011 4:57 PM

@ Clive Robinson: I come from the USA, and still live there. I claim no knowledge of European or Asian property laws, and am not surprised that dictatorships or monarchies are somewhat less responsive and responsible than those countries where the rulers at least must stand for re-election periodically.

The examples you quote seem to be all of *Government* actions, whereas the unbathed one was referring to private corporations. You have a firm friend in me when it comes to objecting to Government power to seize assets, etc. with very little recourse to us poor taxpayers.

@ kangaroo: I don't remember a single foreclosure case in which the debtor truly paid the debt on time, although there certainly may have been a few anomalies in poor record-keeping, etc.

Generally, the housing bubble of the early 2000s was caused by looser fiscal and monetary policy; Government arm-twisting of banks to loosen the time-tested standards of mortgage lending, so that two administrations of differing parties could each claim "higher minority homeownership on my watch"; and eventual sheer speculative greed, based on the "last fool" theory -- people bought second or third homes with no intention of living in them or renting them, merely that they would "surely" sell them for $50k profit in six months. That works until the country runs out of fools.

As noted in my previous post, many institutions were careless in documenting the chain of ownership of the debt. But did you ever see a case where the debtor said, "I paid on time every month, and have canceled checks or bank statements to prove it"? The courts rubber-stamped most of these because, *in fact*, the bottom line is: You borrowed money and agreed to pay it back on schedule. Did you, or didn't you? In virtually all cases, the answer is no, so there was no point in filing a defense.

Lenders do not like to foreclose, contrary to popular belief. It hurts their public image, and generally is a losing proposition. Houses sit vacant during the process; they deteriorate; are vandalized; fleeing homeowners steal the air conditioning, the plumbing and lighting fixtures, even the copper wire to sell for scrap. The lender *cannot* make a profit on a foreclosure, because if the auction sale price exceeds the lender's Judgment amount, the remainder belongs to the debtor. But in most cases, the homes were now worth less than what was owed.

If the above were not true, why have so many banks failed in the US over the past few years?

Small debts such as credit card debts rarely are litigated, precisely because the debtor generally did not pay. Look up the FACT act (Fair and Accurate Credit Transactions -- it's an unwritten law that no law can be passed in the US unless it has a clever acronym ;) for the extensive protections that I've *already mentioned* -- your right to dispute any monthly statement, and their requirement either to provide reasonable proof within 60 days or to reverse the charge, etc.

This time, no hiding links in the sig, as I've been doing on various topics over time. My magnum opus on the US housing and mortgage bubble/crisis:

http://www.amiright.com/parody/misc/...

Please note the last paragraph of the footnotes, which I'll reprint here for those who don't wish to wade through it all:
*********
"One report a couple of years ago, as the massive wave of foreclosures was becoming apparent, noted that 81% of the loans being foreclosed were of the "no-doc" type, quickly labeled "liars' loans" (good one!), but that fact has been drowned in the wave of pity and scapegoating from the bleeding hearts, who, oddly enough, never seem to bleed for honest, hard-working, taxpaying, bill-paying citizens. Strange choice of bleeding."
*******
Explanation: "No-doc(umentation) loan" = not having to verify your employment, income, and assets/liabilities, vs. the time-honored method of two years' Income Tax returns, last two pay stubs, verification of employment by one's employer, bank account statements, etc. Perhaps foolish on the part of lenders to do this, but that does not excuse the fact that the borrower (often encouraged by a dishonest loan broker) would fabricate whatever figures were needed to qualify for the loan.

In closing, *every* mortgage loan application to a Federally-related institution, which was nearly all of them (sold loans to GNMA or FNMA, or their deposits were insured by FDIC), contains a statement above the borrower's signature averring that everything in that application is true and correct, and that knowingly making any false or misleading statement or omission is a felony against the United States, punishable by five years in prison.

How many of these foreclosed "victims" (barf) have you seen go to jail for their falsified loan apps?

I rest my case.


TomMay 11, 2011 5:17 PM

@ Clive Robinson and kangaroo:

I attempted to post a rather lengthy reply to each of you, but the first one was held for moderation, possibly because of a link to my writings on the subject, or perhaps because of length.

Second try was filtered because of "too many posts from you in a short period of time". (zero successes).

Hopefully, one or the other will show up here in the not-too-distant future.

@ MODERATOR: Could you please advise what exactly tripped the filters? People post external links frequently, and the one in the first post was to a respected site where individuals can post their original works.

If it's length of comment, what is the length limit?

If you wish to respond via private e-mail, I left one in the box this time.

I humbly apologize for using the weenie method of switching IPs to get *something* posted, but I wanted to let Clive Robinson and "kangaroo" know that I had tried to respond in a timely manner, and to look for a response perhaps later today. Your forgiveness is greatly appreciated, as is your service in keeping the site free of junk.

TomMay 11, 2011 5:30 PM

Then -just as nowadays- the one who was able to read, won: "...with both a name and the date 1558 visible."
A name and the date. So someone able to read and write must have been present. In 1558 -which is early renaissance, not "the middle ages" and 50 years after Gutenberg printed the first books- this would have most likely have been some official writer employed by the town or -in rural areas- a member of the clergy who also kept chronicles and probably signed the stick. Unfortunately there was no photo but I bet ether the date or the name featured some unique ornament as an initial which served as a signature.

ModeratorMay 11, 2011 6:39 PM

Tommy, sorry about the hassle. I don't think anyone else has been hit with as many spam filter false positives except maybe Clive. The straw that broke the camel's back in this case was the phrase "mortgage loan," and I've removed that filter.

One thing you can do to reduce the chance of any more false positives is put in an e-mail address every time you comment. (Preferably a fake one -- it won't be checked.) Having a previous comment published under the same e-mail gives you a bonus that should make it unlikely you'll spamfiltered again.

JonMay 11, 2011 8:53 PM

How to make a fortune off the foreclosure mess as a small-time homeowner

(Note that this does NOT in any way involve predicting the collapse - In fact, you'd do better if it hadn't, and you'd sold out early, but you missed that. Oh well. You can make a fortune anyhow):

While house prices were going up and credit was nearly free, take out a few nothing down, interest-only loans. Buy a few (let's say, 10) rental properties, for, say, $300,000 each. Not unreasonable, for California. (Ridiculous for Michigan... :)

Rent them out such that the rental income barely covers the mortgage and basic maintenance. You don't have to make any money at this stage, because your house values are going up. Let's say each house rents for $2,000 a month.

Let's say you've bought into a booming market, and a year later all your houses are now worth $350,000. Great! You've just made half a million dollars! Not bad.

Now the market collapses, and all your houses are suddenly worth only $250,000. And you have loans out on each worth $300,000. You are now half a million in the hole. Ouch!

So you just stop paying your mortgages. Don't tell your renters- After all, they have to keep paying rent - and start to drag out the foreclosure process.

Of course, since you're likely to lose all your houses, maintenance flies out the window too, but you're still pulling in $20,000 a month in rent, while now paying out *nothing*. Fine.

Given an income of $20,000 a month, it's not unreasonable you could hire a good lawyer, so off he goes to postpone the process a bit further.

You get 90 days free. That's $60,000, and unlike paper profits, that's cash in the bank. Then your lawyer swings into action, and should have no problem with getting a year, or perhaps two, years delay on each foreclosure process.

Each year of delay on the foreclosure process is worth $240,000 to you. And again, that's cash in the bank.

If your lawyer can put them off for two years (not uncommon), you now have $480,000 cash on hand (less what you paid your attorney).

And finally, about one in ten contested foreclosures were won by the homeowners (mostly by, as pointed out before, by bad paperwork among the shuffling lenders). So you could reasonably expect to get one property free and clear - Another $250,000 in the black.

So, to summarize: At the outset, you were in hock for $3mil and had $3mil in assets. Net value? Zero. They went up to $3.5mil - handsome profit in a year, but merely in illiquid assets. Then the market collapsed, and you were $0.5mil in the red.

But by just stopping payments on the loans, two years later the bank has nine of your (now probably a bit run down) properties, and you have nearly $0.5mil in cash and a $0.25mil property free and clear.

Total time: Three years. Profit? $750,000. Not bad work, if you can get it.

Of course, your renters got screwed - They won't find out about any of this until the Sherrif shows up with three-day 'notice to vacate' signs to staple to the door... Leases? Schleases... *sour grin*

cafMay 11, 2011 11:39 PM

Clive: I think the phrase that most aptly applies to anyone that "buys" property in a foreign, occupied country is "Caveat Emptor".

PaeniteoMay 12, 2011 10:05 AM

@Jon:
No idea how it is in your jurisdiction, but here the bank would not simply get the house in case you default on your loan.
You'd still be required to pay the money if you have it. Only if you're broke, the loan contract allows them to take the house as a compensation (it's even slightly more complicated as that).

tommyMay 12, 2011 10:21 PM

@ Jon:

That's called "skimming", and it's a criminal offense on multiple counts, including the embezzlement of tenants' security deposits.

The surviving banks have learned an expensive lesson, so the nothing-down loans are pretty much a thing of the past.

In the loans in which I'm involved in any way, there is a clause in the Mortgage that states that immediately upon any default, the Lender has the absolute right to collect the rents directly from the Tenant, simply by providing the Tenant with a copy of the Notice of Default and a copy of that clause of the Mortgage. This prevents the landlord from profiting as you describe, thus removing the incentive to do so, and also mitigates the loss to the Lender substantially. And it is strictly enforced: any mortgage payment by the Landlord/Borrower unpaid for 30 days or more, and the Tenant is served that notice. However, if the landlord/debtor later makes good on the arrearage, they of course resume collecting rents, and in any event, they are always credited with rent payments that the Lender collects.

Unfortunately, most major institutions don't bother with such things; to the contrary, they often evict the tenant, as you noted, even if it is a good tenant who pays rent on time. Which leaves them with a vacant, depreciating house, whereas a house with a good tenant already in place becomes an attractive purchase for an investor to buy the home from the Bank. Admittedly, it's difficult when you're a nation-wide institution, but the banks could hire local property managers on a commission basis. Their failure to follow this common-sense procedure greatly worsened their losses during the ongoing crisis.
***

@ MODERATOR:

"I don't think anyone else has been hit with as many spam filter false positives except maybe Clive."

Wow, so it's not just my imagination? Thanks! :D

Any chance you could e-mail me the banned-word list, so I can avoid them? I promise I won't give it to the bad people who would use it to work around the filters.

I would have included a *real* e-mail address all along, but I didn't know that it helped. I have no problem with doing so in the future. Bruce says it won't be published, and if we can't trust Bruce ... well, why are we all here? ;) Also, anyone who wants to contact me can follow the links in most of my sigs, and find a reCaptcha on the landing page, which will give the contact info. Thanks for the apology and the advice.

ChuckMay 13, 2011 10:23 AM

The person loaning the money back then probably wasn't a complete crook as banks tend to be today. I doubt there was interest tallied up on the stick for a 30% increase from the original value.

tommyMay 13, 2011 10:43 PM

@ MODERATOR:

In return for all my false positives, how 'bout I give you three true positives: the three posts from "sophie zeng" above.

David ThomasMay 14, 2011 9:58 PM

The use of division as a security technique is neither new nor confined to tally sticks.

Indeed, its use is evident in the etymologies of two English words.

The first is 'charterparty', referring, of course, to the agreement between a shipper and the carrier. If you ship containers today with a shipping company, you'll work with one of these.
'Party' refers to separation - the shipper would take one half, and the carrier the other. Before photocopying, it was torn.

An even more obscure word is 'indenture' '! An indenture was a bond, which operated much like the tally stick. It was cut in two - indented - in a wavy or jagged pattern. Authenticity would be confirmed if the two sides lined up.

jchdMay 15, 2011 2:47 AM

I've seen tally sticks in use in french rural areas as recently as 30 years ago. Not only are they hard to forge but also minimize the need for cash and change. The one I saw in use in bakeries carried up to three types of notches: straight form like = and the 2 possible V-style notches like . Different notches represented the three bread prices.
They probably have been in use worldwide, thanks to their effectiveness and simpicity.

jchdMay 15, 2011 2:49 AM

Oops, special characters got eaten by dog!

I meant "V-style notches like "greater than" and "less than" glyphs.

AutolykosMay 15, 2011 6:14 AM

The tradition is well alive today - in bars they sometimes still make a mark on the coaster for each beer ordered.
As to security of the original method, there are AFAIR four methods of attack:
a) sawing off part of the stick (with a few notches) as the borrower
b) making a few new notches (as the lender)
c) losing/destroying the stick and claiming none existed (as the borrower)
d) making a new half of another stick with different notches and claiming the other party did just this

With methods a) and b) it is completely obvious who cheated - so here the security works. Attack c) requires some additional security features so the lender can "prove" his half to be legit (like a signature). Then the borrower would only score an own goal with this tactic as it enables the lender to add notches without fear of being challenged. Attack d) is actually not that much different from c). If the sticks don't match, they clearly don't belong to the same debt, so it is just the same as if one of the sticks is lost/destroyed.

anotherposterMay 15, 2011 10:51 AM

Some people suggested to have a third "copy" for safekeeping by an authority. Problem here is, that this might give the third party power to play with it. So every court case would be a two-against-one situation, and the higher bribe usually wins.

The idea behind not having a third copy is, that one can detect all cheating, it's impossible to correct it. Since one can compare the detailed texture of the sticks, "deleting" marks is not possible. Adding one is easy, but then the party who would gain from doing so, actually looses, because the whole transaction becomes invalid and no money will be paid back whatsoever.

Alternatively, an amount money would be paid back after review by a court, but this necessarily exposes the lender as a cheater. In medieval times this meant no access to cities (markets) and if somebody killed the offender, he would not be held responsible.

RogerMay 16, 2011 10:09 AM

I note that some of the foregoing discussion has assumed that literacy was rare in the period when this tally stick was made. This popular view originated with early mediaevalists in the Victorian era; modern historians think that we have been seriously under-estimating literacy rates in the Early Modern period.

It is probably impossible, or at least very difficult, to come up with hard numbers because censuses generally only counted those literate in Latin. However present opinion seems to be that by the end of the 15th century the literacy rate may have been as high as 25% of adult men. The rate may have been lower for females but even among peasant women, functional literacy was not rare.

By 1558, when this tally stick is dated, peddlars could make a living selling "chapbooks" of lewd verses in pubs so literacy outside the clergy must have been pretty common.

LarryFMay 16, 2011 1:05 PM

the only way i can see to prevent the fake stick "attack" would be to authenticate the two halves. that could be done by "signing" (since many could not write, possibly burning a distinct mark or an impression from a ring) each halve and each party holding a half "signed" by the other party.

Paul G.May 19, 2011 1:39 PM

The borrower pays the larger amount, the lender receives the lesser amount and the government receives the difference. Neither party would benefit if there was a change. Of course, if the parties were angry at each other they may not care if the gov't got the difference.

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