re: Re It's "immoral" to strategically default on one's mortgage

I agree, JT. We should all think like you. Everyone who is underwater should default, assuming doing so lessens their own personal burden. Banks will be flooded with properties they cannot unload, further depressing real estate values, which will lead to more folks being underwater, which will lead to further depression and so on and so on.

Borrowing costs would be astronomical, assuming you can find someone to loan money in the first place.

And where would all of this leave the national and world economy? Back to the barter system? Every man for himself?

JT, in general I respect your business acumen, but you are wrong here, and I question whether this is nothing more than a weak flame attempt on your part. More often than not, you come across as a miserable human being.

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I agree, JT. We should all think like you. Everyone who is underwater should default, assuming doing so lessens their own personal burden.

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Correct.

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Banks will be flooded with properties they cannot unload

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Why can't they unload them?

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further depressing real estate values, which will lead to more folks being underwater, which will lead to further depression and so on and so on.

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If your point is that real estate prices might be too high, then I agree.

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Borrowing costs would be astronomical, assuming you can find someone to loan money in the first place.

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What has happened to borrowing costs over the past 3 years, since the flood of "unloadable" properties has hit the market?

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And where would all of this leave the national and world economy? Back to the barter system? Every man for himself?

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I don't know why you would assume any such thing. Disposing of bad debts has been around for millennia.

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JT, in general I respect your business acumen, but you are wrong here, and I question whether this is nothing more than a weak flame attempt on your part. More often than not, you come across as a miserable human being.

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It's undeniable that business gets a free pass while the individual borrowers are being painted with a huge negative brush. The banks already got their bailout, so I'm not sure why everyone is always in such a rush to knight for them.

Beck was harping on the supposed immorality of walking away from mortgages a while back. He jumped through a bunch of logical hoops to explain why it was okay for corporations, but not for individuals. His contortions were quite amazing.

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Interesting point. Similar to not carving out a large segment of borrowers who were trying to game the system to begin with or reached for too much home, those "borrowers" are unethical to begin with. What happens to borrowing costs for those that pay and desire credit in the future? In a normal world they will go up, that's what, as lenders demand more compensation to take risk but in this current scenario all bets are off. If I knew a neighbor walked and had the means to pay and it affected the resale value of my house I wouldn't hold the person in a very forgiving manner as, in effect, they would be stealing from me and my family.

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I suppose you could argue this going forward, but I think it's giving people way too much credit to think that in 2005, someone who reached too much to buy a house were doing so as part of a well though out plan to strategically default if necessary. Much more likely is they were simply convinced that it was a risk-free transaction. Which is certainly stupid, but I'm not sure I'd classify it as "unethical".

Perhaps another way to view your sentiments is that buying a house is taking on a lot of other risks than just the house itself. But I don't see how that's any cause to "blame" your neighbor for acting in his own financial interest.

It's also quite unclear that borrowing costs for you have gone up even as this behavior has exploded.

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knight for banks as if they were so pure.

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Banks absolutely drove the housing bubble. And they made money hand over fist for it as well.

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Please explain to me how a capitalistic economy full of JT's and devoid of ethics operates.

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You might want to start by explaining to me how this is even a matter of ethics to begin with.

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It's also quite unclear that borrowing costs for you have gone up even as this behavior has exploded.

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Which is why I wrote if the defaults were occurring in a normal environment borrowing costs would have gone up, but the govt is subsidizing everything. Let's be real, if the GSE's and Fed's monetary policy hadn't gone off the reservation the banks would not have been able to lend the sums they did.

Homebuyers never considered the outcome if the housing markets went south when reaching for property in hopes it would go up and they would benefit? C'mon, man, there can't be that many people without critical thinking skills that couldn't determine the potential downside of their own actions/participation. That is what is pissing me off, heads I win, tails you lose mentality as many of these underwater "borrowers" are more culpable than the lenders and I have made it clear numerous times that I am not a fan of greedy banksters. Borrowers have some responsibility in this scenario. It's like being given a free pass in life for being lazy, stupid, or crooked. Homebuyers didn't need a finance bankground to understand that housing prices don't go up forever and if banks had been required to hold a reasonable exposure on the loans they made they might have thought about potential losses unless they were GA community bank execs who placed greed above all normal responsibilities.

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Perhaps another way to view your sentiments is that buying a house is taking on a lot of other risks than just the house itself. But I don't see how that's any cause to "blame" your neighbor for acting in his own financial interest.

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Buying a house is the largest financial responsibility most people take on in their lives, and can obviously have a hugely negative outcome on their futures if they frick it up. Evidently many thought they were bullet proof or didn't consider what might happen in negative circumstance. If a neighbor makes a truly stupid housing decision then he/she is exerting negative consequences on other neighbors, that is reality.

I'm not losing sleep over any of this, but stupid or greedy homeowners are just as culpable as bad lenders. Net/net, the current monetary policy has hurt me more than helped as my assets hugely outweigh liabilities. If I wanted to lever up it would be a benefit, but now all it is is a huge drag on returns of low risk assets.

He knows all of this. He's just flaming. Let it go.

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if the GSE's and Fed's monetary policy hadn't gone off the reservation the banks would not have been able to lend the sums they did.

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Agree. The Feds monetary policies early this decade combined with the Bush tax cuts are mostly responsible for fricking the economy for a decade +.

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Homebuyers never considered the outcome if the housing markets went south when reaching for property in hopes it would go up and they would benefit? C'mon, man, there can't be that many people without critical thinking skills that couldn't determine the potential downside of their own actions/participation.

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Yeah, there are that many stupid people out there. I assure you of that. MANY did not even consider (seriously) falling home prices after a point in time (around 2006).

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many of these underwater "borrowers" are more culpable than the lenders

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Agree at least as culpable. A fool and their money are quickly separated. If you are going to be stupid, you pay for it.

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Borrowers have some responsibility in this scenario.

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Of course. A lot of responsibility. Maybe most of it.

My point in this whole discussion is I am going to make rational economic decisions in my own self interest and no one else.

Assigning responsibility for the problem and how people react to their current situations are two different things. Stupid borrowers should pay a price and suffer. They should not have what amounted to a free spin of the wheel to take a shot with someone else's money. However, that is how the current system is set up. It is not really a totally free spin as credit is impaired and so on, but to tell someone they have a moral or ethical obligation to pay a mortgage when it is not in their best interest to do so is sorta not realistic and does not make any sense.