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John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay...
No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth. The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com
I think walking away could be a smart move for some people, depending on the situation.
IMHO the mortgage problem was created by allowing stock market funded mortgage companies to issue mortgages they would later resell. This removed the responsibility from the issuing company and that company derived their income based on the number of mortgages sold and not the quality of those mortgages.
The result was too many mortgages issued to too many people that didn't have any means of paying the money back except by selling the house and realizing the speculative gain. The collapse of this gain put a stop to the speculation. The system funded this low margin speculation and like all margin driven speculation collapsed when the gamblers (homeowners) could not meet the margin call.
A few people got very rich off this scheme but many millions have to bankrupt because they cannot afford to cover their debts as housing prices correct downward. Just look at the 1920’s and replace buying dubious stocks on margin with buying overpriced houses.
What I think isn't very nice, the government is handing $8,000 to "first time" homebuyers to buy up the homes others are losing. Why doesn't the government give everyone $8,000 and be fair about it? Or cut everyone's taxes by $8,000? It's wrong that the homeowners who may have 5-10 years into a home are taking such big losses yet the first time homebuyers are making a killing, not only benefitting by dropping home prices but a $8,000 gift from the government.
John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay...
No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth. The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com
I think walking away could be a smart move for some people, depending on the situation.
America has become a "walkaway" society,....no personal responsibility whatsoever. Times get tough,...walkaway. Walkaway from marriage, from family, from the mortgage, from a car payment, from a job,....whatever. JUST WALKAWAY!!
Those damned finance companies,....how DARE they lend money on a vehicle which IMMEDIATELY loses much of its value when it is driven off the lot. Hey,...walk away,....of course after you have driven it for a few months while the repo people are looking for it.
What's wrong with this society? Blaming "corporate America" for all the ills of the world just won't cut it anymore. People who buy things they can't afford only add to the problems that America is experiencing. The time for "IF-IT-FEELS-GOOD-DO-IT" died in the 60s and 70s.
America has become a "walkaway" society,....no personal responsibility whatsoever. Times get tough,...walkaway. Walkaway from marriage, from family, from the mortgage, from a car payment, from a job,....whatever. JUST WALKAWAY!!
Those damned finance companies,....how DARE they lend money on a vehicle which IMMEDIATELY loses much of its value when it is driven off the lot. Hey,...walk away,....of course after you have driven it for a few months while the repo people are looking for it.
What's wrong with this society? Blaming "corporate America" for all the ills of the world just won't cut it anymore. People who buy things they can't afford only add to the problems that America is experiencing. The time for "IF-IT-FEELS-GOOD-DO-IT" died in the 60s and 70s.
Stop paying for that car, lose the car...
"Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them." The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com
Both sides entered into the contract. The bank lent that amount of money presumably based on the fact that the house was worth what they were lending. So if the mortgage defaults, they still have something worth what they thought. The BANK made the bad decision as much as the homeowner. They BOTH suffer the consequences. They BOTH are responsible.
There is NO walking away from responsibility here, just making a financial judgment that's best for you, personally. In a sense, this is the ultimate in personal responsibility.
What I think isn't very nice, the government is handing $8,000 to "first time" homebuyers to buy up the homes others are losing. Why doesn't the government give everyone $8,000 and be fair about it? Or cut everyone's taxes by $8,000? It's wrong that the homeowners who may have 5-10 years into a home are taking such big losses yet the first time homebuyers are making a killing, not only benefitting by dropping home prices but a $8,000 gift from the government.
That's not really any different from a state or city giving a special tax break to a big company to encourage them to build a plant there. They don't turn around and give that tax break to every other business already located there - and such special tax incentives happen all the time. It's just the way things are - and the reason is pretty simple - governments can't afford to do that so they "target" the special things whey want to encourage (in the former case, it's homebuyers, in the latter, it's new companies coming in).
"Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them." The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com
Both sides entered into the contract. The bank lent that amount of money presumably based on the fact that the house was worth what they were lending. So if the mortgage defaults, they still have something worth what they thought. The BANK made the bad decision as much as the homeowner. They BOTH suffer the consequences. They BOTH are responsible.
There is NO walking away from responsibility here, just making a financial judgment that's best for you, personally. In a sense, this is the ultimate in personal responsibility.
WAY TO GO!!!
I don't believe I have EVER seen such a convoluted rationalization. Let me get this straight,...BOTH parties signed a contract in good faith,...but since "times are hard",...it's OK for one to just "walkaway" and let the other one suffer 100% of the consequences?
Your definition of "personal responsibility" is a joke.
I don't believe I have EVER seen such a convoluted rationalization. Let me get this straight,...BOTH parties signed a contract in good faith,...but since "times are hard",...it's OK for one to just "walkaway" and let the other one suffer 100% of the consequences?
Your definition of "personal responsibility" is a joke.
Which one is suffering 100% of the consequences?
The homeownerloses their deposit and all the mortgage paid AND their house!! The bank HAS THE HOUSE!!!
"Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged." The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com
IMHO the mortgage problem was created by allowing stock market funded mortgage companies to issue mortgages they would later resell. This removed the responsibility from the issuing company and that company derived their income based on the number of mortgages sold and not the quality of those mortgages.
The result was too many mortgages issued to too many people that didn't have any means of paying the money back except by selling the house and realizing the speculative gain. The collapse of this gain put a stop to the speculation. The system funded this low margin speculation and like all margin driven speculation collapsed when the gamblers (homeowners) could not meet the margin call.
A few people got very rich off this scheme but many millions have to bankrupt because they cannot afford to cover their debts as housing prices correct downward. Just look at the 1920’s and replace buying dubious stocks on margin with buying overpriced houses.
Yup, in spite of all the outrage that the goverment lending standards allowed all those poor people to buy homes they couldn't afford, the truth is - it's not so much that the standards were too low as it is the fact that - low as those standards were - even THOSE standards were not being followed by lenders.
The reason for this is EXACTLY as you wrote - lenders DIDN'T CARE if the borrowers could ACTUALLY AFFORD they homes they were buying - so those lenders "fudged" - they pushed appraisers to appraise a house at the selling cost (even if the house did not really meet that value). Those appraisers who didn't continually appraise houses at the cost of the houses were simply not given any more work.
Those lenders who didn't really qualify for the loan, mysteriously were able so.
The lenders did whatever it took to make the sale happen - whether or not the sale SHOULD have happened was unimportant. What was important was to make as many loans as possible. The more loans the original lenders made (and sold) - the more money the lenders made. Whether the borrowers would actually be able to make the payment on those loans was unimportant to the lenders - for the simple reason that the original lenders had no INTENTION of ever holding the loan. They made their money by creating loans and then turning around and IMMEDIATELY SELLING those loans to someone else - who in turn bundled that loan with many others and sold the package of loans as an investment to someone else (sometimes this happened multiple times).
The result was that no one with any knowledge of the borrowers had a vested interest in actually verifying that the borrowers could actually AFFORD THE HOME. In the view of the original lenders (and even the middlemen lenders) - that was SOMEONE ELSE'S problem. So - as it turned out, the banks and investors who bought these packaged loans as investments actually had NO IDEA what they had. They had trusted that the original lenders had paid due dilligence. Sadly, that was often NOT the case.
All of this was a REALLY REALLY BAD idea - because in the long run it was BOUND to collapse - and when it did then the ENTIRE STRUCTURE was brought down - including many investors who had NO IDEA of the risk they were actually taking.
In my opinion what the original lenders did was CRIMINAL. In many cases they KNOWINGLY created loans they KNEW were bound to collapse - and then sold those loans on to someone else (pocketing their money while selling junk to someone else).
Ken
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