Posted on 10/04/2009 10:37:29 AM PDT by TheDailyChange
>>>People who default strategically and lose their houses appear to understand the consequences of what they're doing. Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters "are clearly sophisticated," based on the patterns of selective payments observable in their credit files. For example, they tend not to default on home equity lines of credit until after they bail out on their main mortgages, sometimes to draw down more cash on the equity line.
>>>Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.
>>>Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said, but they appear to look at it as a business decision: "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," he said of defaulters. But they see it as the most practical solution under the circumstances.
(Excerpt) Read more at latimes.com ...
>>>Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.
>>>Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said, but they appear to look at it as a business decision: "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," he said of defaulters. But they see it as the most practical solution under the circumstances.
The author is Kenneth R. Harney — not TDC. Confused attempt.
>>but they appear to look at it as a business decision:
We live in a society where “It’s just a business decision” is used to justify abandonment of morals and humanity like “I was only following orders” was used by the Nazis.
Our entire legal system is based upon lawyers exploiting the law to their monetary advantage.
Nobody ever worries about whether lawyers are "moral."
The Washington criminals wrote crooked laws to benefit certain people with the correct skin color, and other people figure out how to exploit those laws to their own advantage.
I fail to see any problem here, other than the fact that the L.A. Times thinks the laws should only be exploited by protected minorities and trial lawyers.
My mistake, I was not trying to pass off as the Author. Otherwise I would not have put the link to the LA TIMES.
Sorry!
The bottom line point concern here is:
What will happen to the American economy when millions of Americans make a “Business is Business” decision and pursue a strategic default?
Shrug. I see no problem with this. The banks already got billions in welfare money from us anyway so they won’t be missing anything if people default on their mortgages.
I say Fie upon all that. Follow the law and make legal economic decisions. Don't think about the morality of your economic decisions. Sorry, but there it is. If you violate the law (and refusal to pay your debts may well fall into this category) then you deserve to be punished. But as long as the laws are followed, do what thou wilt.
Morality is very important, but I'm just not sure it overlaps with economics.
This is caused by the ridiculous bubble we had, and the depth of the fall in home prices. And it was intentional on the part of some people.
Let’s say you saw the prices in your city neighborhood going up back in 2001-2003 time frame. You aren’t sure where it is going, but you refinance, pull some equity out, and use the money to buy some acreage in the country.
A few years later, 2004-2005 time frame, the rocket is still shooting up. Your home in the city has appreciated significantly. You refinance again, take your new equity from appreciation out, and frame in a shell of a “country vacation home” with the proceeds of the refinance.
Then, early 2007 comes around, your city home has appreciated, but your job is looking shakey and the future doesn’t look so good. The Dems have taken over the Congress, and you think hard financial times might be on the horizon. You take out a HELOC, max it out and finish the interior of your “country vacation home.”
Late 2008, comes, you've lost your job in the city, things are bad. You are leveraged to the hilt and 40% upside down on your city home. Why not walk away, move to the country, live in your free and clear “vacation home” and let the bank deal with the mess in the city.
That isn’t a hypthetical situation. That is how a lot of my new neighbors in North Georgia (before I moved to FL this summer) came to be where they are today.
And it certainly is not the same thing as "legality."
The more numerous and complex laws are, the less moral the legal system.
I see this sort of thing as similar to declaring bankruptcy. Yes, we should all pay the bills that we have knowlingly incurred. But there may come a time when the only thing that makes sense is to cut your losses and start over.
You can't blame "everybody else" when they figure out a way to defend themselves.
What you have drawn is almost a fingerprint of some of my bankruptcy clients in the Atlanta area. They are making a rational decision to surrender property which is underwater (financially) by perhaps 45% of its purchase price, and which will not appreciate to a point above the principal mortgage balance during the remainder of their lifetimes. I’ll leave the ethical evaluation of that to others who care to bat it around. But the rational, or strategic, decision to default is made by folks like this with their eyes wide open. I think it’s about time the media recognized this and broadcast the fact that it is not simply the poor widows, orphans and children who are being “victimized” by foreclosure, who fit their dramatic template so well.
Let the dems be the scumbags and crooks. We don’t need this type of convoluted crap...
Doing "wrong" is ALWAYS more convenient and eaier in the short run. IN the long run it'll ruin the only real possession any of us have - our souls.
(Putting the money to productive uses rather than feeding parasites...)
Cheers!
It has already happened. The fat's in the fire and it's everyone for himself (just like it was when "home buyers" were "spending" money right and left like there was such a thing as a free lunch.
I’m sure many abortions began as “business decisions.”
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