WASHINGTON — Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.
1. Comment by Jeffrey H. (flibber)— November 28,2009 @ 1:27AM
Ratings:-21+56
The whole idea of an agreement, contract, or giving your word is that you perform regardless of changing conditions. Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it.
There is a moral dimension called "one's word is his bond," and is the basis of all contracts and agreements. This professor is basicly trying to justify theft with typical anti-capitalist rhetoric. What if the lender is a relative or friend? Should the borrower also walk away and stick the lender with his loss?
Maybe it's not embarrassment preventing folks from walking away, but a sense of right and wrong. Besides they may be thinking of something other than money. They may like their home and regard it as more than an investment.
2. Comment by Jeffrey H. (flibber)— November 28,2009 @ 1:34AM
Ratings:-17+17
A new type of mortgage could also be written allowing for decrease in property value: an ajustable value mortgage based on appraised value, and allowing one or more rewrites of the mortgage contract. Of course this would be accompanied by a higher interest rate that few borrowers would likely opt for.
3. Comment by Brian P. (6155)— November 28,2009 @ 2:19AM
Ratings:-20+42
So… the banks etc don’t want Americans “tearing apart the very basis upon which mortgage lending rests” by borrowers walking away. Dugh! Talk about a double standard!! But not modifying mortgages by playing ‘whose on first’ with the paper, -that’s okay! Tearing apart the very fabric of the world’s economy, hey, that’s fine! Submitting the middle class to debt their grandchild will have to pay…oh that’s honky dory! And bringing untold millions of families to their financial knees across the planet: NO problem!
I wonder how many die hards will comment today along the lines of: ‘Well, you all just have to keep your financial obligations!” Be aware that the industry watches these comment sections, & always lobby their favored view. I’m not Spartacus, but hey, we are acting like slaves. The Prof. is right. Enough homeowners walking away would get the mans attention. It is the government that allowed the power players to play too BIG a game, & consequently, the world fell apart. Now the common man & woman can’t get a job, no one can get credit, & the most vulnerable of us suffer first, suffer longest, & heal the worst. Now that the government can’t run the economy via over ample credit, they can’t create jobs. I feel another ‘Stimulectomy’ coming!
All the money masters, politicians, government lackeys, bankers, wall streeter’s etc. should be rounded up & convicted of something like treason, then put on an island. Hey, let’s give them Manhattan! Then they should be forced to live their in Stone Age conditions for the rest of their lives. Then the rest of us can invent a new way to do things & get on with shaping our tomorrows. Their way didn’t work.
And I'm going to add to this: all you employed folks out their, God bless ya, be aware that unemployment at about 10% means 90% of you have jobs. But if this continues, another 10% might fall out of employment, heaven forbid, & we WILL actually have a true Depression on our hands. That's not what my Daddy went thru the first one to have his grandchildren experience.
Have compassion for your fellow man & woman. We ARE all in this together!
4. Comment by Ted D. (Downing)— November 28,2009 @ 2:25AM
Ratings:-3+49
Would the Fannie Mae executive's who said that
"there's a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community."
also agree that
"there's a moral dimension to this as banks who abandon sound banking practices and speculate in high risk, speculative investments simply abandon their country and contribute to the destabilization of their neighborhood, community and county?"
5. Comment by Peter N. (tbp)— November 28,2009 @ 2:28AM
Ratings:-7+35
The lending organizations need to face this condition head on instead of hoping that people will "do the right thing".
They are going to have to finance these properties to someone at the new lower value!
Morality and the mortgage industry have long been separated.
6. Comment by Stich J. (Stich Jones)— November 28,2009 @ 2:33AM
Ratings:-4+41
If the tables were turned I have no doubt in my mind the bankers would take any opportunity to walk. I mean look at the insurance industry. The TARP money would have done more good if it were used to offset everyone's deficit instead of giving it straight to bankers. Now they are just hoarding that money. The best thing to have done would have just let the market re-adjust on its own and have the ones who enabled this fiasco to take it in the shorts. I think the professor is right after having a day to think it over. That being said I'm staying put because I like my place.
7. Comment by Ken Z. (kenwen)— November 28,2009 @ 2:34AM
Ratings:-31+20
Aha...now the lights come on Brian. You are a victim! As to your comment "submitting the middle class to debt their grandchild will have to pay"...are you talking about Obama and the democratic congress? If so, I agree big time. I also agree with your comments on unemployment....it's a horrible statistic right now. Unfortunately I don't look for rapid improvement. Too much beauracy, regulation, and tax burden to incent business growth. Elections have consequences.
8. Comment by Rich K. (Rich907)— November 28,2009 @ 4:55AM
Ratings:-6+38
It is especially galling to read Ranieri's comments how irresponsible it is to walk away from a mortgage. The vast majority of these foreclosures would never have happened if the mortgage lending industry had acted responsibly and not given out sub-prime mortgages to people who could never in a million years be reasonably be expected to pay them back.
Maybe it is irresponsible for individuals to follow this advice and plan how to maximize their lives while walking away from their obligations. On the other hand, they have plenty of bad examples to follow...the financial services industry that has thrived on the bailouts provided by our tax dollars and the members of Congress who have walked away from their oaths of office and allowed themselves to be rented by the highest bidders.
There is no issue of importance today that does not pit American taxpayers against the interests of the corporate elite and the politicians...from mortgages, to health insurance, to immigration, it is all about how much of our money tax dollars the politicians can turn over to the corporate elite that has bought them. Just to be clear..there is no real difference between Republican politicians or Democrat politicians on any of these issues.
9. Comment by miller m. (miller)— November 28,2009 @ 5:09AM
Ratings:-2+37
"The whole idea of an agreement, contract, or giving your word is that you perform regardless of changing conditions. Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it."
Of course, banks and large corporations do this stuff all the time. Have you checked your credit card agreement lately? Read the fine print: if you've had it for more than a year, the terms of the agreement may give you a little surprise.
Mortgages are secured by material objects, not just the word of the borrower. The terms of many of the mortgages issued during the bubble were patently unsustainable, and the issuers knew it at the time.
And who holds the mortgage? Most mortgages written in the past decade have changed hands so many times that it takes a major effort just to figure out who the holder is. The entire industry was turned into a shell game by Wall Street some time ago. Those guys don't have to laugh all the way to the bank--they are the bank.
10. Comment by Bill H. (billhwaddell)— November 28,2009 @ 6:08AM
Ratings:-2+34
Bankers and mortgage lenders hiding behind a morality arguement? That's a good one. Where is the "morality" in foreclosures, which lenders have demonstrated a willingness to do quite easily? Mortgage lending has never been about morality - it is a cold, hard business transaction on both sides.
The terms of the mortgage are clear - (A) pay OR (B) lose the collateral and suffer the consequences. There is nothing immoral about choosing option B. If a borrower who chooses option B does not want to accept the implications of that choice, that might be immoral, but so long as the borrower accepts the consequences - a poor credit rating - then the borrower has not acted immorally or unethically.
It seems to me that lenders are unwilling to accept the consequences of their business decisions to loan money on houses that turned out to not be worth it, makng them the immoral ones. They should have learned way back in business school that risk and return are always inter-twined. They want the return on their investments without accepting the risk inherent in those investments. Where is the morality in making bad housing loans, then sticking the American taxpayers with the bailout cost rather than having those who made the lousy investments suffer the consequences?
11. Comment by Jefferson C. (commandermarcos)— November 28,2009 @ 6:13AM
Ratings:-2+17
Perhaps it is the fear that people will follow White's subversive advice that keeps credit tight, even though banks have averted liquidity crisis as a result of the bail-out.
12. Comment by paul s. (fiasco)— November 28,2009 @ 6:14AM
Ratings:-21+12
"The terms of many of the mortgages issued during the bubble were patently unsustainable, and the issuers knew it at the time."
With all this talk of blaming the loan issuers, where is the talk of people taking on debt that was unsustainable? Nobody was forcing anyone to get irrational loans for properties with over-inflated prices.
No surprise that a lawyer says we should walk away from a legal obligation. Thats the nature of their profession. Contracts and other agreements mean nothing to them. Let anarchy rule.
14. Comment by Jefferson C. (commandermarcos)— November 28,2009 @ 6:30AM
Ratings:-8+18
If bankruptcy is used too cavalierly, as White proposes, the consequences of bankruptcy will inevitably get worse. and those consequences will affect those who pay their bills on time as well as those who don't.
The banks will become exceedingly leery of loaning on reasonable terms. Downpayments of 50% and more will be required on mortgages. Credit histories will be lengthened: bad credit scores will stick with defaulters for decades, rather than years. The lines of credit which allow many small businesses to operate will be a thing of the past.
Bankruptcy is an essential safety valve which allows the economy to deal rationally with failure. Subverting the concept of bankruptcy - as White proposes - will inevitably subvert the economy as a whole.
15. Comment by Michael N. (Michael8)— November 28,2009 @ 6:36AM
Ratings:-4+26
Jeffrey 1 says
"Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it."
You mean the way the credit card companies are allowed to do? I agree with you---a contract is a contract. But we already have "institutionalized contract breaking" in our financial sector.
16. Comment by James M. (James M. from Tucson)— November 28,2009 @ 6:36AM
Ratings:-3+20
The good professor has a point. We got ourselves into this mess and only we (not the banks or government) can get ourselves out. The banks hold all of the cards and we none. So, if you find yourself seriously in trouble, you do have the option to 'walk away'. Yes, it will hurt your credit score, but you can do things before hand that will buffer the blow. One thing he forgot to mention is to cancel all of your credit and live only on cash (not even a debit card.) This drives the banks nuts as they make money on each and every transaction. Once you take that power away from them, they don't know what to do. For example, a couple that was underwater and after the funds were released, went to Wells Fargo. They were denied a realignment loan. The next week they showed up with keys in hand and handed them to the loan officer. The loan officer refused to take them. They lived in the house for six months, mortgage free, until the bank realized what was going on. Then they went back to the bank and did the same thing, this time they got the realignment loan. The bank lost because of one person's massively incorrect decision. And they are still living in the same house with a reduced loan. The hit on their credit score was from a 800s to 700s and they are now living cash only except the new mortgage and a car loan. No credit cards nor debit cards. They worked the system correctly. Walking away from an underwater loan is not the best thing to do, but in some cases it is.
17. Comment by Evel K. (EvilMike)— November 28,2009 @ 6:37AM
Ratings:-13+21
So tell me Prof. White: I have a family, a home and an underwater mortgage, if I walk away, what do I do then?
Is a lender gonna give me another mortgage on a cheaper home? (not likely)Am I going to pass a credit check if I'm just looking to rent a home? (also not likely)
It's a grown up world out here professor. Actions do have consequences. Hard as it is, the best bet is try and work within the system and get a loan modifcation.
18. Comment by James M. (James M. from Tucson)— November 28,2009 @ 6:39AM
Ratings:-3+18
#1: It is already happening. If you have not received a notice from your credit card company, you will. Interest rates are going up and terms and conditions are changing forced by legislation at the Federal level. I've received notice that both of my cards are going up and that payment periods will be shortened (22 vice 30 days.)
20. Comment by Fred B. (whuh)— November 28,2009 @ 7:38AM
Ratings:-10+11
#16 James - "Walking away from an underwater loan is not the best thing to do, but in some cases it is"
Can I have your keys when you walk ?
Nice anecdotal story of a friend who has a friend who knows someone....
And let me guess, in three or so years we'll start having stories in the paper about how evil the banks are because they won't lend anybody money.
"I know they walked on their last mortgage...but they were making a play for Financial Justice!"
22. Comment by Joe S. (Joe Saba)— November 28,2009 @ 8:01AM
Ratings:-3+9
#3 be aware that unemployment at about 10% means 90% of you have jobs. But if this continues, another 10% might fall out of employment, heaven forbid, & we WILL actually have a true Depression on our hands.
oops, read the U6 report and you shall see the gubbermint has already said we have 17%+ unemployment
hmmmmm, well back in the 90's the govt CHANGED the way they count unemployed
to cook the books
and if you count in the self-employed, small business owners, etc. who are NOT making it - ie no income
then that rate shoots to over 23%
and we're not counting the highly indebted NEW COLLEGE GRADS
which amount to another 130,000 PER MONTH
oops - depression here we come
a depression BTW is simple a set of rolling recessions
as the govt stimuli gets sucked up by the rich and the govt rolls back the stimuli, the next recession gets to begin
10 years??
maybe 20 or more years
look at JAPAN
exploding in DEBT, massive amounts of NEW RETIREES - sound familiar, and growing govt DEBT
make them the next bomb to go off
NOW IF WE COULD ONLY TIME THIS so they all go off at the same time
24. Comment by Joe S. (Joe Saba)— November 28,2009 @ 8:08AM
Ratings:-5+7
F&F, fannie and freddie just announced TIGHTER underwriting standards
FHA to is tightening underwriting
since they do over 90% of all mortgages today, what will the banks do next????
since every home that closes with a worthless govt loan just BAILS OUT THE BANKS
some 18% of ALL FHA loans are at least 2 months behind in payments
23% of low down loans are in default
and the shadow supply - banks withholding foreclosure as to not flood the market
in Tucson that is OVER 10,000 homes the banks have in foreclosure but not going to sale, some 6 months or more since they even made a payment and the bank hasn't even started the foreclosure
and 1 in 3 UNDERWATER
free rent folks - if you don't have anything to protect
of course then you need to call me as I need good tenants
25. Comment by scott w. (rivers2BX)— November 28,2009 @ 8:09AM
Ratings:-1+18
As a (former) property investor who has taken out numerous loans over the years, I had heard any number of tempting mortgage and financing options during the boom. Even at the time, many of the terms put forth by lenders seemed too good to be true, and I worried about becoming over-extended. Luckily, I never took advantage of some of these amazing deals, preferring the slow, steady route, but I can certainly see why others did. At the end of the day, you have to live with yourself, and though I think many of the lending institutions are downright criminal, and even though trying to do the right thing can still lead to losses, at least I feel good about attempting to remain a responsible person and pay my debts.
26. Comment by evergreen m. (evergreenmc)— November 28,2009 @ 8:20AM
Ratings:-9+11
I think his advice is correct! These banks were giving loans knowing that what they were doing was wrong. If you can't pay just walk. For all you people disagreeing and telling people to get a Modification, have you tried going through the modification process? Even if they select you, most of the time they don't, they jerk you around and drag it out for months making your debt more and more, Only to say in the end that you don't qualify. The modification process is lengthy and is a hassle. Its no wonder people are walking, the mortgage companies won't work with the borrowers. Screw the mortgage companies, let them eat the debt!
27. Comment by russell m. (russyboy)— November 28,2009 @ 8:23AM
Ratings:-5+16
One of the things you should have learned from your parents is bad behavior on someone else's part doesnt justifiy your own bad behavior. The banks and morgage company had no restraint and just cared about the instant buck, sickening but so what. This doesnt justify just walking away from your responsbility.
When you brought that house you thought you got a fair deal, you should honor that. If you cant afford the payments, well that happens, but so many people can afford it and are walking anyway, thats disgusting. Personally I could never trust or lend anything to someone I knew who did this. Would you be willing to lend your hard earned money to someone like this? They are the kind of people who can always justify their bad actions, where it is always someone else's fault.
29. Comment by Richard J. (saved)— November 28,2009 @ 8:31AM
Ratings:-15+11
Leave it to a lawyer to spew this irresponsible venom. It is incredible this guy is allowed to teach. No wonder people feel it is ok to live beyond their means. No responsibility what so ever.
30. Comment by jonah m. (Jonah)— November 28,2009 @ 8:40AM
Ratings:-6+4
i don't give a damn about my credit score! Maybe it would stop all the credit card solicitations!
I think that the amount of the loan that is written off should be TAXABLE--that would stop people from walking away from their mortgages. Just a thought.
31. Comment by sandra f. (azrabbit)— November 28,2009 @ 8:45AM
Ratings:-2+14
Incredible!
The banks/mortgage lenders through their bought and paid for Congress created a real estate Ponzi scheme to prey on the unsuspecting crop of mainly first-time buyers, and we hold the buyers morally responsible.
As Ed says above, the "efficient breach" has preserved the wealth of many of the very people who would hold the feet of their victims to the fire.
If you want to be wealthy (or even solvent) you need to learn to act in ways that ignore the judgment of your adversaries and make sense for you and yours. A mortgage is not a moral obligation, it is a contractual one. There are consequences written in for the very eventualities many are facing today. They may not be pleasant, but renting and feeding the kids well darn sure beats holding on to the house at any cost!
33. Comment by Fred B. (whuh)— November 28,2009 @ 8:48AM
Ratings:-2+7
22 Joe - "well back in the 90's the govt CHANGED the way they count unemployed"
Starting with their definitions.
Only forty percent (plus or minus) of the populace is "in the workforce".
10% (or 25% depending how you count) of the forty percent are "unemployed".
When in actuality over 60% of the population doesn't have a job. Subtract the 10% (or more) of the population that works for the Government and you're looking at 30% of the population that pays taxes.
34. Comment by karen N. (dsertsky220)— November 28,2009 @ 8:55AM
Ratings:-1+13
How do you think wealthy people stay wealthy?They never have to pay when they lose or are on the wrong side of a trade.
Wall Street Bankers have been stiffing the American Taxpayer for years.
This last bailout of the elite well connected was not the first bailout they have received.Remember the Asian financial crises in 1999?
Many small businesses hide behind a corporation,break contracts,stiff their employees and vendors all of the time.
After running the business into the ground and grabbing the money,
they open up with a new name, and business as usual while their personal finances are never touched.
36. Comment by Ed H. (Mr Ed)— November 28,2009 @ 9:21AM
Ratings:-2+14
During the depression of the thirties my grandfather lost all of the money he had in the bank and eventually went bankrupt. There was no federal insurance then to protect your account and the bank made no effort to "work with him" to try and save his assets! I am retired now and spent most of my years in the defense industry. Those of us out on the floor listened to the company tell their "skinny dog story" when it was time to negotiate a new contract. "We're barely making a profit!" as they sat there with their BMW's and timeshares in Sedona. The problem that all of us in the "pollyanna club" have is that we let the banks, employers, etc put us on the defensive all of the time. In other words YOU are the issue. The cure is to stop explaining to them and make them explain to you the reasons for their shameful behavior!
37. Comment by Peter V. (Peter V)— November 28,2009 @ 9:51AM
Ratings:-2+7
This story inspires a really great idea whose time has definitely come.
Establish a "Lending Score" for individual banks that is just as rigid and draconian as a citizen's Credit Score.
When banks screw up IN ANY WAY there should be a way for the injured party to report it against that bank's score.
No need for appeal, there could be no appeal; it would be all about accountability. A bank with a low score would simply get less and less business until it might decide to fold, like citizens do. Now THAT would be Justice.
If a bank wants to know its Lending Score it will have to pay handsomely to get a report, and its application to learn its number will cause a further penalty on the number. Who would be sorry for them?
38. Comment by Peter V. (Peter V)— November 28,2009 @ 10:00AM
Ratings:-5+7
As for "bringing down the economy" that is nonsense. The Economy is its people, not its banks. But nobody gives much of a damn about bringing down individual people. Bailout? not likely.
Have you ever noticed a tear in the eye of a realtor buying up foreclosed properties?
The professor is right on the mark when he points out that the shame and guilt are all on one side of the supposedly two-sided contract.
I have seen depression and anger in the eyes of a financier who gets caught on the wrong side of a deal, but NEVER shame or guilt.
39. Comment by Peter V. (Peter V)— November 28,2009 @ 10:10AM
Ratings:-9+10
Brent T. White, the University of Arizona law school professor who authored that manifesto should get a Nobel Citizen Prize for courageous and creative action to mitigate economic injustice.
The value of his remarks are in the control aspects of fear, guilt, and shame being exploited HYPOCRITICALLY by one side to thwart the best interests of the other side in an economic conflict.
If people actually knew and understood what the professor was saying they would be free of fear and they would be able to handle the trauma of a financial shutdown rationally. They could negotiate from a position of strength; and they could use premptive defensive tactics BEFORE their ship hits the sand.
In short, people could put the fear o'god where it belongs, on the bankers' heads.
40. Comment by Peter V. (Peter V)— November 28,2009 @ 10:27AM
Ratings:-7+6
It is a fantasy, an urban myth, that a contract is "giving your word." If this were really true, a word and a handshake could buy a house or a car or a business.
There are people whose careers are based on the FACT that a contract is not just a word. They are lawyers, and it is their business to put TEETH in the words, not a handshake.
Most people realize that the natural inclination of people in business is to cheat in whatever way they may believe to be their best interests.
So the service provided by lawyers alleviates the harm from that proclivity to cheat, thus saving countless lives and fortunes.
Beware of the person who claims he NEVER cheats, because he may actually believe it while he robs you blind. His kind is the most hazardous to deal with because it is the most difficult to detect.
The American system of justice is built on the preconception that peoples' natural inclination is to cheat. That is why it works so well. It is conceived in Reality, not Fantasy.
42. Comment by david w. (dbzero)— November 28,2009 @ 10:46AM
Ratings:-2+10
This is rich; a f!@@#$ing Lawyer pontificating on the moral dimension of honoring a commitment? These people and their nefarious industry have destroyed any sense of honor with their hairsplitting caveats and slight of hand and havethe gall to talk about moral exemptions. Astonishing!
43. Comment by R R. (jarhead1968)— November 28,2009 @ 11:16AM
Ratings:-3+5
I guess everyone missed the news Dubai just decided to stop paying on their unsustainable debt, causing a major crisis in world markets, guess this issue of walking away from a upside down mortgage is controversial, but to listen to the "honor their debts theorists" is truly rich, at some point one has to decide, file bankruptcy or not, and one can take wait till a involuntary foreclosure occurs at the banks/lenders leisure or look out for yourself and your family, and to heck with the greedy bankers/wall street welfare queens/kings who got theirs and truly do not care what happens to the main street in america. I sold my home in 2002, saw this bubble bust coming, saw the one in 1980's when the GOP geniuses caused that one to during the infamous Savings and Loan scandal occured, by the way McCain was knee deep in that one trying to save his buddies too! :-)
44. Comment by Jim T. (Kauaicat)— November 28,2009 @ 11:18AM
Ratings:-4+4
Not one word in any of these comments regarding the role of Fannie Mae and Freddie Mac in ENABLING the bankers to create the "subprime" loans. F-Mae and F-Mac owned 45% of these loans by purchasing them on the secondary market, and then churned their inventory by selling loans to the investment banks which derivatized the loans, allegedly minimizing the risk. Marketing these derivatives was no problem - after all, many of the loans were "backed" by F-Mae and F-Mac, government sponsored entities, which everyone knew would be bailed out by government if necessary. And, as a matter of fact, they were right, because we, the taxpayers, are still throwing money down that rathole.
Finally, the local banks did not create the market for subprime loans, they merely used F-Mae and F-Mac as ready buyers on the secondary market, with the banks keeping the loan processing fees and, in some cases, the fees for collecting the payments. If you're a banker, and you can make money by passing the risk on to someone else, why not??? Unfortunately, certain politicians (and we know who they are, although some refuse to place the blame where it belongs) protected the F-Mae and F-Mac racketeers.
45. Comment by R R. (jarhead1968)— November 28,2009 @ 11:20AM
Ratings:-5+1
[This comment has been removed]
46. Comment by jonah m. (Jonah)— November 28,2009 @ 12:00PM
Ratings:-3+4
regarding my posting #30 above, Arizona is an antideficiency state. that means that the amount of the loan that was written off cannot be taxed. So I stand corrected there.
If I were underwater, I would walk. I bought my house in 2006, at the height of the market. Unfortunately, i put down a large downpayment. Wish I hadn't. I think I am probably down 200K, but still not underwater.
47. Comment by scott w. (rivers2BX)— November 28,2009 @ 12:35PM
Ratings:-3+3
While I feel many of the lending institutions and their practices were/are downright evil, nevertheless all this moral relativism puts us on a very slippery slope. Although I completely understand anyone walking away from a financial obligation as a last resort, I still feel people should attempt to honor their words and commitments--including the weasels that run the banks. No one forced me to sign loan papers--it was up to me to not only understand what I was signing, but also to understand that there are no guarantees in life, and there is risk in any financial undertaking. Without personal responsibility and trust on both sides of the table, we risk our entire system of business. I can't control the banks, but I can control my own behavior and attempt to be as responsible as I can. As usual, the greedy, irresponsible people have screwed things up for many of us--but I refuse to stoop to their level.
48. Comment by Peter V. (Peter V)— November 28,2009 @ 12:45PM
Ratings:-3+3
David W has a wonderful sense of honor that he likens to a "moral dimension."
That misconception is part of the fantasy that this manifesto is a refutation of.
I say that ALL good people have an intention to honor their committments, that's what makes them "good" people instead of "bad" people. However when sudden poverty, or dire illness, or dreadfully bad luck strikes, their moral dimension migrates in the direction of immediate survival [inevitably, like migrating Temperate Zones in a Global Warming episode] not only for themselves but also for their families and dependents.
That is why lawyers are hired to deal with this aspect of human nature. They are so EXPERT at their nefarious trade that ordinary people forget it is for THEM the lawyers are working.
49. Comment by Peter V. (Peter V)— November 28,2009 @ 12:45PM
Ratings:-7+1
Like pagan priests, the lawyers undertake both the problem and guilt for the sin.
From a business point of view, it is best to honor commitments so long as it is cheaper to honor than to dishonor. An executive would be looking at sudden unemployment if he argued to his shareholders that the company went down because of a "sense of honor" when they should have take the advice of their attorneys a year before.
Individuals in this upside down society are actually held to a higher standard than corporations. It isn't right...
Did you ever realize that Jesus would have been unemployable?
52. Comment by scott w. (rivers2BX)— November 28,2009 @ 1:36PM
Ratings:-1+3
One's sense of responsibility and obligation need not be tethered to either the impossible hope of a level playing field, or the unrealistic fantasy of reciprocal honesty. It is simplistic, naive, and no one is perfect, but I just find that life feels better, and less stressful, if I at least attempt to do the responsible thing. The current trend of avoiding any and all responsibility, on any and all levels of government and society, is corrosive, and will continue to divide us.
54. Comment by George C. (warmerhere)— November 28,2009 @ 2:15PM
Ratings:-1+5
Walking away is irresponsible. If you cannot pay your mortgage, pay only what what you might otherwise spend for rent, remain in the house, and do the basic maintenance. You can't control the greed and incompetence, of many lenders, but you can run your own life in a way that makes you proud.
55. Comment by Michael R. (micmac99)— November 28,2009 @ 2:26PM
Ratings:-2+3
#54, one man's pride is another man's irresponsibility. You have no idea about individual situations. In some cases it makes far too much sense to walk away from a mortgage if there is no possible hope of getting current.
We are indeed deeply divided as a society on this issue if some people are strongly advocating "don't be irresponsible" and others are strongly advocating "do what's right for YOUR own situation." Who is correct? Either? Both?
56. Comment by Bobo A. (4323)— November 28,2009 @ 4:01PM
Ratings:-1+4
What's funny to me is that people seem to think bankers will take the hit if everyone walks - sorry, the only ones hurt in this fiasco will be those who lived within their means and now are paying for everyone else. Although banks may "lose" money on paper, you can rest assured that no individual (except maybe a cashier) in the industry is going to pay for their irresponsible practices or for those who walk.
57. Comment by Bobo A. (4323)— November 28,2009 @ 4:07PM
Ratings:-1+3
too often people's emotions get in the way of clear financial thinking about mortgages, turning them into what he calls woodheads — individuals who choose not to act in their own self-interest
Proud to be a woodhead, I guess. I saw an unlocke bicycle sitting out late at night the other day that I chose not to take. Saw a guy drop some money and told him instead of taking it. I cannot imagine a society where everyone acted only his their own self-interest. In his world, it appears the greedy bankers and other crooks are to be honored.
58. Comment by Don M. (saffronbindy)— November 28,2009 @ 5:51PM
Ratings:-0+3
Sometimes you just do what is right.
I went grocery shopping this morning. Wandering down an aisle I found a set of keys. Nobody was around, so I snagged them up. They had the car alarm deactivating deal on there, as well as a key which was embossed with the make and model of the car.
I do not have a car, I use the bus. I could have very easily gone into the parking lot, found the car, and driven away.
I was not even tempted. Because, you see, that would have not have been right. As I was waiting on line at the customer service counter to turn the keys in I noticed the lady behind me was frantically searching her purse. I very politely asked her what she was worried about. I knew, of course. She had lost her keys. I told her I had them, and gave them back to her. She was very happy about this, and thanked me profusely.
Our country, such as it is, was founded on handshakes and oral commitments. They drew up no contracts between themselves. If a man shook your hand that was good enough. He would live up to his responsibilites.
One secret of the history of our founding fathers not often taught in schools is that they didn't like each other much. They usually threatened to shoot each other. But when they shook hands that was good enough.The Declaration was signed by bunches of people, whoever they could dig up. The Constitution was a different matter. The first deal there was we didn't really know how many votes we'd need. Some claimed it must be 51%, and some claimed it was 67%. We never actually decided. When the constitution was put up for a votes states started to abstain. We weren't quite sure if this was legal.
So our founders pulled a very nice trick. Maryland was never sure they wanted to be a part of us. So we just decertified them. Two other states were technically British protectorates, so we then decertified them too. Now we had a quorum, and we passes our constitution. Then we clooected up our rogue states and made them states again
59. Comment by Peter V. (Peter V)— November 28,2009 @ 6:10PM
Ratings:-0+1
And so, to the bottom line of the interesting historical tidbit in 58, my friend Don said we "sometimes" could depend on a handshake unless it was about something really really important like a new nation.
In that kind of case we resorted to creative chicanery, which is far more prevalent in human intercourse than nice people would admit to in polite company.
Of course anybody who has been noticing the news lately knows that. You wouldn't want to believe a handshake from a denizen of DC even if it was a promise that he was lying. It would give you pause, but you wouldn't believe it anyway.
I don't hold much with lawyers, politicians, priests, or funeral directors. They all lie in the normal course of business, so a handshake with one of them just isn't worth the risk of H1N1. Business done with them is best done with notarized hard copy.
A true friend is something else altogether. A handshake should be sufficient for almost anything. That is what friends are for.
61. Comment by Larry B. (lmblue)— November 28,2009 @ 6:29PM
Ratings:-3+2
Don't walk - Run. As a bankruptcy attorney I have proudly helped many people abandon properties they can't afford or that are underwater. The reality is that credit recovers quickly. The mortgage industry with the help of wall street created this fraud on the americain people. The industry and government have done little to help. Walking in great numbers would send a strong message.
62. Comment by john s. (jsmirand)— November 28,2009 @ 7:07PM
Ratings:-0+1
Personal might have been when you were financed (and the loan remained with) your local main street bank.
Now its just business. If your loan is sold to some large lender in the East Coast, then weather you pay or foreclose should just be business. The fine print specifies actions the lender can take if you don't pay, and those actions, are just business. You aren't hurting anyone's feelings.
If ultimately, too many Americans walk from their loans, then we can expect future loan requirements and rates to become tougher and higher. That too, is just business.
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Housing: UA firebrand's advice to walk away meets some blowback
WASHINGTON — Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.The whole idea of an agreement, contract, or giving your word is that you perform regardless of changing conditions. Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it.
There is a moral dimension called "one's word is his bond," and is the basis of all contracts and agreements. This professor is basicly trying to justify theft with typical anti-capitalist rhetoric. What if the lender is a relative or friend? Should the borrower also walk away and stick the lender with his loss?
Maybe it's not embarrassment preventing folks from walking away, but a sense of right and wrong. Besides they may be thinking of something other than money. They may like their home and regard it as more than an investment.
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A new type of mortgage could also be written allowing for decrease in property value: an ajustable value mortgage based on appraised value, and allowing one or more rewrites of the mortgage contract. Of course this would be accompanied by a higher interest rate that few borrowers would likely opt for.
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So… the banks etc don’t want Americans “tearing apart the very basis upon which mortgage lending rests” by borrowers walking away. Dugh! Talk about a double standard!! But not modifying mortgages by playing ‘whose on first’ with the paper, -that’s okay! Tearing apart the very fabric of the world’s economy, hey, that’s fine! Submitting the middle class to debt their grandchild will have to pay…oh that’s honky dory! And bringing untold millions of families to their financial knees across the planet: NO problem!
I wonder how many die hards will comment today along the lines of: ‘Well, you all just have to keep your financial obligations!” Be aware that the industry watches these comment sections, & always lobby their favored view. I’m not Spartacus, but hey, we are acting like slaves. The Prof. is right. Enough homeowners walking away would get the mans attention. It is the government that allowed the power players to play too BIG a game, & consequently, the world fell apart. Now the common man & woman can’t get a job, no one can get credit, & the most vulnerable of us suffer first, suffer longest, & heal the worst. Now that the government can’t run the economy via over ample credit, they can’t create jobs. I feel another ‘Stimulectomy’ coming!
All the money masters, politicians, government lackeys, bankers, wall streeter’s etc. should be rounded up & convicted of something like treason, then put on an island. Hey, let’s give them Manhattan! Then they should be forced to live their in Stone Age conditions for the rest of their lives. Then the rest of us can invent a new way to do things & get on with shaping our tomorrows. Their way didn’t work.
And I'm going to add to this: all you employed folks out their, God bless ya, be aware that unemployment at about 10% means 90% of you have jobs. But if this continues, another 10% might fall out of employment, heaven forbid, & we WILL actually have a true Depression on our hands. That's not what my Daddy went thru the first one to have his grandchildren experience.
Have compassion for your fellow man & woman. We ARE all in this together!
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Would the Fannie Mae executive's who said that
"there's a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community."
also agree that
"there's a moral dimension to this as banks who abandon sound banking practices and speculate in high risk, speculative investments simply abandon their country and contribute to the destabilization of their neighborhood, community and county?"
Might both be right?
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The lending organizations need to face this condition head on instead of hoping that people will "do the right thing".
They are going to have to finance these properties to someone at the new lower value!
Morality and the mortgage industry have long been separated.
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If the tables were turned I have no doubt in my mind the bankers would take any opportunity to walk. I mean look at the insurance industry. The TARP money would have done more good if it were used to offset everyone's deficit instead of giving it straight to bankers. Now they are just hoarding that money. The best thing to have done would have just let the market re-adjust on its own and have the ones who enabled this fiasco to take it in the shorts. I think the professor is right after having a day to think it over. That being said I'm staying put because I like my place.
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Aha...now the lights come on Brian. You are a victim! As to your comment "submitting the middle class to debt their grandchild will have to pay"...are you talking about Obama and the democratic congress? If so, I agree big time. I also agree with your comments on unemployment....it's a horrible statistic right now. Unfortunately I don't look for rapid improvement. Too much beauracy, regulation, and tax burden to incent business growth. Elections have consequences.
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It is especially galling to read Ranieri's comments how irresponsible it is to walk away from a mortgage. The vast majority of these foreclosures would never have happened if the mortgage lending industry had acted responsibly and not given out sub-prime mortgages to people who could never in a million years be reasonably be expected to pay them back.
Maybe it is irresponsible for individuals to follow this advice and plan how to maximize their lives while walking away from their obligations. On the other hand, they have plenty of bad examples to follow...the financial services industry that has thrived on the bailouts provided by our tax dollars and the members of Congress who have walked away from their oaths of office and allowed themselves to be rented by the highest bidders.
There is no issue of importance today that does not pit American taxpayers against the interests of the corporate elite and the politicians...from mortgages, to health insurance, to immigration, it is all about how much of our money tax dollars the politicians can turn over to the corporate elite that has bought them. Just to be clear..there is no real difference between Republican politicians or Democrat politicians on any of these issues.
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"The whole idea of an agreement, contract, or giving your word is that you perform regardless of changing conditions. Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it."
Of course, banks and large corporations do this stuff all the time. Have you checked your credit card agreement lately? Read the fine print: if you've had it for more than a year, the terms of the agreement may give you a little surprise.
Mortgages are secured by material objects, not just the word of the borrower. The terms of many of the mortgages issued during the bubble were patently unsustainable, and the issuers knew it at the time.
And who holds the mortgage? Most mortgages written in the past decade have changed hands so many times that it takes a major effort just to figure out who the holder is. The entire industry was turned into a shell game by Wall Street some time ago. Those guys don't have to laugh all the way to the bank--they are the bank.
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Bankers and mortgage lenders hiding behind a morality arguement? That's a good one. Where is the "morality" in foreclosures, which lenders have demonstrated a willingness to do quite easily? Mortgage lending has never been about morality - it is a cold, hard business transaction on both sides.
The terms of the mortgage are clear - (A) pay OR (B) lose the collateral and suffer the consequences. There is nothing immoral about choosing option B. If a borrower who chooses option B does not want to accept the implications of that choice, that might be immoral, but so long as the borrower accepts the consequences - a poor credit rating - then the borrower has not acted immorally or unethically.
It seems to me that lenders are unwilling to accept the consequences of their business decisions to loan money on houses that turned out to not be worth it, makng them the immoral ones. They should have learned way back in business school that risk and return are always inter-twined. They want the return on their investments without accepting the risk inherent in those investments. Where is the morality in making bad housing loans, then sticking the American taxpayers with the bailout cost rather than having those who made the lousy investments suffer the consequences?
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Perhaps it is the fear that people will follow White's subversive advice that keeps credit tight, even though banks have averted liquidity crisis as a result of the bail-out.
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"The terms of many of the mortgages issued during the bubble were patently unsustainable, and the issuers knew it at the time."
With all this talk of blaming the loan issuers, where is the talk of people taking on debt that was unsustainable? Nobody was forcing anyone to get irrational loans for properties with over-inflated prices.
No surprise that a lawyer says we should walk away from a legal obligation. Thats the nature of their profession. Contracts and other agreements mean nothing to them. Let anarchy rule.
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And what about the people who bought what they knew they couldn't afford hoping to flip the house for a huge profit?
Does this guy's advice apply to vehicle loans too? Most, if not all vehicle loans are upside down from the moment of purchase.
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If bankruptcy is used too cavalierly, as White proposes, the consequences of bankruptcy will inevitably get worse. and those consequences will affect those who pay their bills on time as well as those who don't.
The banks will become exceedingly leery of loaning on reasonable terms. Downpayments of 50% and more will be required on mortgages. Credit histories will be lengthened: bad credit scores will stick with defaulters for decades, rather than years. The lines of credit which allow many small businesses to operate will be a thing of the past.
Bankruptcy is an essential safety valve which allows the economy to deal rationally with failure. Subverting the concept of bankruptcy - as White proposes - will inevitably subvert the economy as a whole.
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Jeffrey 1 says
"Imagine if the banks could raise your interest rates without such being stated in the original agreement when rates rise. Or if they could demand full payment of the motgage at will and foreclose even tho you are paying it."
You mean the way the credit card companies are allowed to do? I agree with you---a contract is a contract. But we already have "institutionalized contract breaking" in our financial sector.
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The good professor has a point. We got ourselves into this mess and only we (not the banks or government) can get ourselves out. The banks hold all of the cards and we none. So, if you find yourself seriously in trouble, you do have the option to 'walk away'. Yes, it will hurt your credit score, but you can do things before hand that will buffer the blow. One thing he forgot to mention is to cancel all of your credit and live only on cash (not even a debit card.) This drives the banks nuts as they make money on each and every transaction. Once you take that power away from them, they don't know what to do. For example, a couple that was underwater and after the funds were released, went to Wells Fargo. They were denied a realignment loan. The next week they showed up with keys in hand and handed them to the loan officer. The loan officer refused to take them. They lived in the house for six months, mortgage free, until the bank realized what was going on. Then they went back to the bank and did the same thing, this time they got the realignment loan. The bank lost because of one person's massively incorrect decision. And they are still living in the same house with a reduced loan. The hit on their credit score was from a 800s to 700s and they are now living cash only except the new mortgage and a car loan. No credit cards nor debit cards. They worked the system correctly. Walking away from an underwater loan is not the best thing to do, but in some cases it is.
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So tell me Prof. White: I have a family, a home and an underwater mortgage, if I walk away, what do I do then?
Is a lender gonna give me another mortgage on a cheaper home? (not likely)Am I going to pass a credit check if I'm just looking to rent a home? (also not likely)
It's a grown up world out here professor. Actions do have consequences. Hard as it is, the best bet is try and work within the system and get a loan modifcation.
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#1: It is already happening. If you have not received a notice from your credit card company, you will. Interest rates are going up and terms and conditions are changing forced by legislation at the Federal level. I've received notice that both of my cards are going up and that payment periods will be shortened (22 vice 30 days.)
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#3 Brian -
Have you walked on your mortgage yet ?
Or are you like the author only "slightly underwater" and therefore the advice doesn't apply...to you.
But everybody else should do it!
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#16 James -
"Walking away from an underwater loan is not the best thing to do, but in some cases it is"
Can I have your keys when you walk ?
Nice anecdotal story of a friend who has a friend who knows someone....
And let me guess, in three or so years we'll start having stories in the paper about how evil the banks are because they won't lend anybody money.
"I know they walked on their last mortgage...but they were making a play for Financial Justice!"
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And we let this guy teach our kids.
Hey Brent. Ever been confronted with the concept of right vs. wrong?
Didn't think so.
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#3 be aware that unemployment at about 10% means 90% of you have jobs. But if this continues, another 10% might fall out of employment, heaven forbid, & we WILL actually have a true Depression on our hands.
oops, read the U6 report and you shall see the gubbermint has already said we have 17%+ unemployment
hmmmmm, well back in the 90's the govt CHANGED the way they count unemployed
to cook the books
and if you count in the self-employed, small business owners, etc. who are NOT making it - ie no income
then that rate shoots to over 23%
and we're not counting the highly indebted NEW COLLEGE GRADS
which amount to another 130,000 PER MONTH
oops - depression here we come
a depression BTW is simple a set of rolling recessions
as the govt stimuli gets sucked up by the rich and the govt rolls back the stimuli, the next recession gets to begin
10 years??
maybe 20 or more years
look at JAPAN
exploding in DEBT, massive amounts of NEW RETIREES - sound familiar, and growing govt DEBT
make them the next bomb to go off
NOW IF WE COULD ONLY TIME THIS so they all go off at the same time
BOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOMMMMMMMMMMMMM
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There is a long standing concept in contract law called "efficient breach."
That is, sometimes you're better off walking away from a contract and paying the costs than keeping to the terms of the contract.
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F&F, fannie and freddie just announced TIGHTER underwriting standards
FHA to is tightening underwriting
since they do over 90% of all mortgages today, what will the banks do next????
since every home that closes with a worthless govt loan just BAILS OUT THE BANKS
some 18% of ALL FHA loans are at least 2 months behind in payments
23% of low down loans are in default
and the shadow supply - banks withholding foreclosure as to not flood the market
in Tucson that is OVER 10,000 homes the banks have in foreclosure but not going to sale, some 6 months or more since they even made a payment and the bank hasn't even started the foreclosure
and 1 in 3 UNDERWATER
free rent folks - if you don't have anything to protect
of course then you need to call me as I need good tenants
and I take CASH or evict PROMPTLY
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As a (former) property investor who has taken out numerous loans over the years, I had heard any number of tempting mortgage and financing options during the boom. Even at the time, many of the terms put forth by lenders seemed too good to be true, and I worried about becoming over-extended. Luckily, I never took advantage of some of these amazing deals, preferring the slow, steady route, but I can certainly see why others did. At the end of the day, you have to live with yourself, and though I think many of the lending institutions are downright criminal, and even though trying to do the right thing can still lead to losses, at least I feel good about attempting to remain a responsible person and pay my debts.
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I think his advice is correct! These banks were giving loans knowing that what they were doing was wrong. If you can't pay just walk. For all you people disagreeing and telling people to get a Modification, have you tried going through the modification process? Even if they select you, most of the time they don't, they jerk you around and drag it out for months making your debt more and more, Only to say in the end that you don't qualify. The modification process is lengthy and is a hassle. Its no wonder people are walking, the mortgage companies won't work with the borrowers. Screw the mortgage companies, let them eat the debt!
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One of the things you should have learned from your parents is bad behavior on someone else's part doesnt justifiy your own bad behavior. The banks and morgage company had no restraint and just cared about the instant buck, sickening but so what. This doesnt justify just walking away from your responsbility.
When you brought that house you thought you got a fair deal, you should honor that. If you cant afford the payments, well that happens, but so many people can afford it and are walking anyway, thats disgusting. Personally I could never trust or lend anything to someone I knew who did this. Would you be willing to lend your hard earned money to someone like this? They are the kind of people who can always justify their bad actions, where it is always someone else's fault.
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These folks borrowed the money.
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Leave it to a lawyer to spew this irresponsible venom. It is incredible this guy is allowed to teach. No wonder people feel it is ok to live beyond their means. No responsibility what so ever.
DO NOT TAKE THIS IDIOT'S ADVICE.
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i don't give a damn about my credit score! Maybe it would stop all the credit card solicitations!
I think that the amount of the loan that is written off should be TAXABLE--that would stop people from walking away from their mortgages. Just a thought.
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Incredible!
The banks/mortgage lenders through their bought and paid for Congress created a real estate Ponzi scheme to prey on the unsuspecting crop of mainly first-time buyers, and we hold the buyers morally responsible.
As Ed says above, the "efficient breach" has preserved the wealth of many of the very people who would hold the feet of their victims to the fire.
If you want to be wealthy (or even solvent) you need to learn to act in ways that ignore the judgment of your adversaries and make sense for you and yours. A mortgage is not a moral obligation, it is a contractual one. There are consequences written in for the very eventualities many are facing today. They may not be pleasant, but renting and feeding the kids well darn sure beats holding on to the house at any cost!
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#17, if you are planning to walk from your mortgage, buy a new house NOW. Move into it, and stop paying on the old one.
This scheme is going on in LAS VEGAS every day. It works.
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22 Joe -
"well back in the 90's the govt CHANGED the way they count unemployed"
Starting with their definitions.
Only forty percent (plus or minus) of the populace is "in the workforce".
10% (or 25% depending how you count) of the forty percent are "unemployed".
When in actuality over 60% of the population doesn't have a job. Subtract the 10% (or more) of the population that works for the Government and you're looking at 30% of the population that pays taxes.
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How do you think wealthy people stay wealthy?They never have to pay when they lose or are on the wrong side of a trade.
Wall Street Bankers have been stiffing the American Taxpayer for years.
This last bailout of the elite well connected was not the first bailout they have received.Remember the Asian financial crises in 1999?
Many small businesses hide behind a corporation,break contracts,stiff their employees and vendors all of the time.
After running the business into the ground and grabbing the money,
they open up with a new name, and business as usual while their personal finances are never touched.
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Karen #34: One minor addition:
"After running the business into the ground and grabbing the money, they collect a bonus, then open up with a new name..."
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During the depression of the thirties my grandfather lost all of the money he had in the bank and eventually went bankrupt. There was no federal insurance then to protect your account and the bank made no effort to "work with him" to try and save his assets! I am retired now and spent most of my years in the defense industry. Those of us out on the floor listened to the company tell their "skinny dog story" when it was time to negotiate a new contract. "We're barely making a profit!" as they sat there with their BMW's and timeshares in Sedona. The problem that all of us in the "pollyanna club" have is that we let the banks, employers, etc put us on the defensive all of the time. In other words YOU are the issue. The cure is to stop explaining to them and make them explain to you the reasons for their shameful behavior!
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This story inspires a really great idea whose time has definitely come.
Establish a "Lending Score" for individual banks that is just as rigid and draconian as a citizen's Credit Score.
When banks screw up IN ANY WAY there should be a way for the injured party to report it against that bank's score.
No need for appeal, there could be no appeal; it would be all about accountability. A bank with a low score would simply get less and less business until it might decide to fold, like citizens do. Now THAT would be Justice.
If a bank wants to know its Lending Score it will have to pay handsomely to get a report, and its application to learn its number will cause a further penalty on the number. Who would be sorry for them?
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As for "bringing down the economy" that is nonsense. The Economy is its people, not its banks. But nobody gives much of a damn about bringing down individual people. Bailout? not likely.
Have you ever noticed a tear in the eye of a realtor buying up foreclosed properties?
The professor is right on the mark when he points out that the shame and guilt are all on one side of the supposedly two-sided contract.
I have seen depression and anger in the eyes of a financier who gets caught on the wrong side of a deal, but NEVER shame or guilt.
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Brent T. White, the University of Arizona law school professor who authored that manifesto should get a Nobel Citizen Prize for courageous and creative action to mitigate economic injustice.
The value of his remarks are in the control aspects of fear, guilt, and shame being exploited HYPOCRITICALLY by one side to thwart the best interests of the other side in an economic conflict.
If people actually knew and understood what the professor was saying they would be free of fear and they would be able to handle the trauma of a financial shutdown rationally. They could negotiate from a position of strength; and they could use premptive defensive tactics BEFORE their ship hits the sand.
In short, people could put the fear o'god where it belongs, on the bankers' heads.
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It is a fantasy, an urban myth, that a contract is "giving your word." If this were really true, a word and a handshake could buy a house or a car or a business.
There are people whose careers are based on the FACT that a contract is not just a word. They are lawyers, and it is their business to put TEETH in the words, not a handshake.
Most people realize that the natural inclination of people in business is to cheat in whatever way they may believe to be their best interests.
So the service provided by lawyers alleviates the harm from that proclivity to cheat, thus saving countless lives and fortunes.
Beware of the person who claims he NEVER cheats, because he may actually believe it while he robs you blind. His kind is the most hazardous to deal with because it is the most difficult to detect.
The American system of justice is built on the preconception that peoples' natural inclination is to cheat. That is why it works so well. It is conceived in Reality, not Fantasy.
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Consider the curious comment by Paul in the New Testament. "All men have sinned and come short of the glory of God."
That was a colorful way of expressing the sentiment described in comment #40.
Nobody's perfect, especially the ones who claim they are. THAT is what Paul meant, to keep hypocrites on notice that God was already onto them.
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This is rich; a f!@@#$ing Lawyer pontificating on the moral dimension of honoring a commitment? These people and their nefarious industry have destroyed any sense of honor with their hairsplitting caveats and slight of hand and havethe gall to talk about moral exemptions. Astonishing!
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I guess everyone missed the news Dubai just decided to stop paying on their unsustainable debt, causing a major crisis in world markets, guess this issue of walking away from a upside down mortgage is controversial, but to listen to the "honor their debts theorists" is truly rich, at some point one has to decide, file bankruptcy or not, and one can take wait till a involuntary foreclosure occurs at the banks/lenders leisure or look out for yourself and your family, and to heck with the greedy bankers/wall street welfare queens/kings who got theirs and truly do not care what happens to the main street in america. I sold my home in 2002, saw this bubble bust coming, saw the one in 1980's when the GOP geniuses caused that one to during the infamous Savings and Loan scandal occured, by the way McCain was knee deep in that one trying to save his buddies too! :-)
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Not one word in any of these comments regarding the role of Fannie Mae and Freddie Mac in ENABLING the bankers to create the "subprime" loans. F-Mae and F-Mac owned 45% of these loans by purchasing them on the secondary market, and then churned their inventory by selling loans to the investment banks which derivatized the loans, allegedly minimizing the risk. Marketing these derivatives was no problem - after all, many of the loans were "backed" by F-Mae and F-Mac, government sponsored entities, which everyone knew would be bailed out by government if necessary. And, as a matter of fact, they were right, because we, the taxpayers, are still throwing money down that rathole.
Finally, the local banks did not create the market for subprime loans, they merely used F-Mae and F-Mac as ready buyers on the secondary market, with the banks keeping the loan processing fees and, in some cases, the fees for collecting the payments. If you're a banker, and you can make money by passing the risk on to someone else, why not??? Unfortunately, certain politicians (and we know who they are, although some refuse to place the blame where it belongs) protected the F-Mae and F-Mac racketeers.
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regarding my posting #30 above, Arizona is an antideficiency state. that means that the amount of the loan that was written off cannot be taxed. So I stand corrected there.
If I were underwater, I would walk. I bought my house in 2006, at the height of the market. Unfortunately, i put down a large downpayment. Wish I hadn't. I think I am probably down 200K, but still not underwater.
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While I feel many of the lending institutions and their practices were/are downright evil, nevertheless all this moral relativism puts us on a very slippery slope. Although I completely understand anyone walking away from a financial obligation as a last resort, I still feel people should attempt to honor their words and commitments--including the weasels that run the banks. No one forced me to sign loan papers--it was up to me to not only understand what I was signing, but also to understand that there are no guarantees in life, and there is risk in any financial undertaking. Without personal responsibility and trust on both sides of the table, we risk our entire system of business. I can't control the banks, but I can control my own behavior and attempt to be as responsible as I can. As usual, the greedy, irresponsible people have screwed things up for many of us--but I refuse to stoop to their level.
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David W has a wonderful sense of honor that he likens to a "moral dimension."
That misconception is part of the fantasy that this manifesto is a refutation of.
I say that ALL good people have an intention to honor their committments, that's what makes them "good" people instead of "bad" people. However when sudden poverty, or dire illness, or dreadfully bad luck strikes, their moral dimension migrates in the direction of immediate survival [inevitably, like migrating Temperate Zones in a Global Warming episode] not only for themselves but also for their families and dependents.
That is why lawyers are hired to deal with this aspect of human nature. They are so EXPERT at their nefarious trade that ordinary people forget it is for THEM the lawyers are working.
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Like pagan priests, the lawyers undertake both the problem and guilt for the sin.
From a business point of view, it is best to honor commitments so long as it is cheaper to honor than to dishonor. An executive would be looking at sudden unemployment if he argued to his shareholders that the company went down because of a "sense of honor" when they should have take the advice of their attorneys a year before.
Individuals in this upside down society are actually held to a higher standard than corporations. It isn't right...
Did you ever realize that Jesus would have been unemployable?
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The banks are just as culpable if not more so than the rest of us. The banks helped make this bed and they should lie in it with the rest of us.
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We should remember that Scott's "slippery slope" in 47 is greased on one side but not on the other.
A moral equivalency might be reached if banks and corporations were to be judged by the same standard people are judged by their Credit Reports.
Banks need to subject themselves to "Lending Reports" that are managed and held anonymously in the same harsh regard as individual's "Credit Reports."
Corporations might have "Corporate Reports" of the same kind.
This would grease Scott's slippery slope on all sides, and whoopee! We'll all go together when we go.
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One's sense of responsibility and obligation need not be tethered to either the impossible hope of a level playing field, or the unrealistic fantasy of reciprocal honesty. It is simplistic, naive, and no one is perfect, but I just find that life feels better, and less stressful, if I at least attempt to do the responsible thing. The current trend of avoiding any and all responsibility, on any and all levels of government and society, is corrosive, and will continue to divide us.
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Fiddle with the credit system all you want folks. I have my money in gold so it won't sink me.
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Walking away is irresponsible. If you cannot pay your mortgage, pay only what what you might otherwise spend for rent, remain in the house, and do the basic maintenance. You can't control the greed and incompetence, of many lenders, but you can run your own life in a way that makes you proud.
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#54, one man's pride is another man's irresponsibility. You have no idea about individual situations. In some cases it makes far too much sense to walk away from a mortgage if there is no possible hope of getting current.
We are indeed deeply divided as a society on this issue if some people are strongly advocating "don't be irresponsible" and others are strongly advocating "do what's right for YOUR own situation." Who is correct? Either? Both?
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What's funny to me is that people seem to think bankers will take the hit if everyone walks - sorry, the only ones hurt in this fiasco will be those who lived within their means and now are paying for everyone else. Although banks may "lose" money on paper, you can rest assured that no individual (except maybe a cashier) in the industry is going to pay for their irresponsible practices or for those who walk.
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too often people's emotions get in the way of clear financial thinking about mortgages, turning them into what he calls woodheads — individuals who choose not to act in their own self-interest
Proud to be a woodhead, I guess. I saw an unlocke bicycle sitting out late at night the other day that I chose not to take. Saw a guy drop some money and told him instead of taking it. I cannot imagine a society where everyone acted only his their own self-interest. In his world, it appears the greedy bankers and other crooks are to be honored.
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Sometimes you just do what is right.
I went grocery shopping this morning. Wandering down an aisle I found a set of keys. Nobody was around, so I snagged them up. They had the car alarm deactivating deal on there, as well as a key which was embossed with the make and model of the car.
I do not have a car, I use the bus. I could have very easily gone into the parking lot, found the car, and driven away.
I was not even tempted. Because, you see, that would have not have been right. As I was waiting on line at the customer service counter to turn the keys in I noticed the lady behind me was frantically searching her purse. I very politely asked her what she was worried about. I knew, of course. She had lost her keys. I told her I had them, and gave them back to her. She was very happy about this, and thanked me profusely.
Our country, such as it is, was founded on handshakes and oral commitments. They drew up no contracts between themselves. If a man shook your hand that was good enough. He would live up to his responsibilites.
One secret of the history of our founding fathers not often taught in schools is that they didn't like each other much. They usually threatened to shoot each other. But when they shook hands that was good enough.The Declaration was signed by bunches of people, whoever they could dig up. The Constitution was a different matter. The first deal there was we didn't really know how many votes we'd need. Some claimed it must be 51%, and some claimed it was 67%. We never actually decided. When the constitution was put up for a votes states started to abstain. We weren't quite sure if this was legal.
So our founders pulled a very nice trick. Maryland was never sure they wanted to be a part of us. So we just decertified them. Two other states were technically British protectorates, so we then decertified them too. Now we had a quorum, and we passes our constitution. Then we clooected up our rogue states and made them states again
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And so, to the bottom line of the interesting historical tidbit in 58, my friend Don said we "sometimes" could depend on a handshake unless it was about something really really important like a new nation.
In that kind of case we resorted to creative chicanery, which is far more prevalent in human intercourse than nice people would admit to in polite company.
Of course anybody who has been noticing the news lately knows that. You wouldn't want to believe a handshake from a denizen of DC even if it was a promise that he was lying. It would give you pause, but you wouldn't believe it anyway.
I don't hold much with lawyers, politicians, priests, or funeral directors. They all lie in the normal course of business, so a handshake with one of them just isn't worth the risk of H1N1. Business done with them is best done with notarized hard copy.
A true friend is something else altogether. A handshake should be sufficient for almost anything. That is what friends are for.
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I think returning a lost item as Don so honestly and honorably did is important to the maintenance of Community Spirit.
A community without spirit, is a community without life or happiness.
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Don't walk - Run. As a bankruptcy attorney I have proudly helped many people abandon properties they can't afford or that are underwater. The reality is that credit recovers quickly. The mortgage industry with the help of wall street created this fraud on the americain people. The industry and government have done little to help. Walking in great numbers would send a strong message.
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Personal might have been when you were financed (and the loan remained with) your local main street bank.
Now its just business. If your loan is sold to some large lender in the East Coast, then weather you pay or foreclose should just be business. The fine print specifies actions the lender can take if you don't pay, and those actions, are just business. You aren't hurting anyone's feelings.
If ultimately, too many Americans walk from their loans, then we can expect future loan requirements and rates to become tougher and higher. That too, is just business.
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