Skip to comments.On the ethics of mortgage loan default
Posted on 06/04/2011 3:20:27 PM PDT by Chunga85
Is it ethical for the American homeowner whose mortgage has been securitized to default, even If they are not financially distressed?
First, consider it is unlikely that marketable, fee simple, insurable title can be obtained as a result of fulfilling the obligations of the related promissory note. On the contrary the titles to some 60 million homes in America are badly clouded. Secondly, encouraging investment in an asset class that has been artificially inflated, then deliberately destroying the price of the asset, as part of a separate profit making scheme is unethical, and any agreement based on this type of fraud is grounds to consider the original debt instrument used in the agreement null and void. Fortunately these grounds are unnecessary, as increasingly US courts are ruling that these mortgages are already invalid for numerous other reasons.
On November 12th, 2010 we published our article Tattoos, Pyramid Schemes and Social Justice in which we advocated that homeowners consider suspending their mortgage payments. In the article we enumerated reasons why we felt this action is both ethical and prudent. On January 11th, 2011 we published our articles Ibanez Denying the Antecedent, Suppressing the Evidence and one big fat Red Herring which outlined the legal realities of securitized mortgages, and the impact of the landmark Ibanez decision on homeowners, particularly in Massachusetts. We affirmed our conviction that Massachusetts homeowners with securitized mortgages might want to consider suspending their mortgage payment, and place instead their funds into an escrow account.
(Excerpt) Read more at amvona.com ...
I think not.
Post it here.
These people are proposing an and to orderly society and economic ruin.
Pay your bills. That’s how it works. Don’t pay, pay the price and they do not forgive.
Sounds like a faulty premise. The homeowner should be able to secure quiet title by going to court.
I have come to believe differently.
Let me do this in formal terms:
I have had (recently) trouble paying off credit card debt.
I have an MBA and experience with accounting (I’m not a complete idiot when it comes to analyzing the risk associated with extending credit to a given individual “A” nor am I in the habit of simply blowing off debt.).
Bank (call it “Bank of A” or “A of Bank”) extends to me a line of credit (call it $xxxk). They do so ON NO SOUND BASIS WHATSOEVER. In fact they INUNDATE me with literature telling me that I’ve been “pre-qualified”. They do not ask me for my any documents. They do not analyze whether or not my condition and history suggest that I will or will not be able to make the payments over time. They simply say: “here’s the money”.
I believe (given my MBA education) that they are UNDERVALUING THE RISK of lending to me (for many reasons).
But the fact that their underwriting department UNDERVALUES THE RISK (from MY perspective) does not mean that I should believe that they (WITH THEIR MUCH GREATER EXPERTISE AND ACCESS TO DATA)have ALSO undervalued THEIR risk.
Look: if someone says to you “here’s $10 no questions asked all you have to do is pay me $11 a year from now” is it YOUR job to do the risk analysis to determine whether or not (given that X% of people will ALWAYS default) the person lending you the money makes money over that period? Or is that THEIR job?
org, you my friend are ignorant on this issue. No one should get a free home but the citizen should be protected from fraud. In fact we have laws on the books that the banks are breaking daily but the courts are ignoring them because the judges salaries are partially being paid by the very banks breaking the laws.
There is so much fraud in the banking\mortgage industry it will make your head spin. We all have been affected negatively by this in more ways than one. Take some time and learn about what is really going on. Look at the big picture.
Yes, no one should get a free home including the banks. Most foreign investors were made whole by TARP funds. The banks sold the mortgages for a profit but continued to service them. The domestic investors were made whole through AIG, Freddie and Fanny but guess what the servicers are able to foreclose on the property, in other words steal the home then re-sell it at a loss(lowering their profits and tax obligations) all with a clouded title. Who is insuring these clouded title? The new title insurance being funded by the very banks who received bailouts.
Most of these sub-prime mortgages had PMI insurance on the as well. Who received the PMI payout?
Yes no one should get a free house but banks shouldn’t be able to either. The banks should not be above the law but they are.
I believe the plunder has destroyed this great nation. Unfortunately, I doubt we will rise out of this in our lifetime.
What would you say if a home owner had the money to sue without ever being late with a payment, own said lawsuit, and was dismissed of the mortgage responsibilities.
Would you feel this homeowner did not deserve the free home he just was awarded?
Why not just post it? Blogs usually have a bunch of flash and malware.
LOL, just keep, telling yourself that silly crap, BS degree class of 75; majors, accounting, real estate, minor industrial engineering. And like the fellow I was talking/ posting to, I think the x has my funny looking robe, but I think she went up a notch and did the doctoral thing, like my nephew.
Your are combining a plethora of issues. Underwriting, secured v. unsecured, etc. The article to me is about moral hazard rather than substandard underwriting.
I believe it customary in real estate to find a purchase you wish to make then ask a lender to finance it for you. Presumably your personal risk analysis was completed prior to the loan request. They underwrite you and make an offer, knowing that in secured lending the risk of total loss is usually non-existent. Now you have an asset on your balance sheet with offsetting debt and they have an asset and a security interest.
It’s lame to say the behavior your lender engages in by dispositioning his assets later on has any impact on your original agreement to pay. This article isn’t talking about weak underwriting, it’s talking about a clear title issue that isn’t part of what you even bargained for. If title was clear in the first place and you pay, it will be clear again.
Comparing that to walk aways on risk priced unsecured lending doesn’t work for me. Lenders know the risk and price accordingly. Also people walk away and file bankruptcy all the time. Both behaviors are expected and thats why GE lends to persons at 30% APR.
It never ceases to amaze me what the sinners will use to justify their sins. "It's okay if I default because the banks are greedy." Whatever helps you sleep at night, sinner.
I am with you on people trying to justify their actions by pointing at someone else. If they don’t pay the mortgage they should drop of the keys and leave. Nothing short of sickening and disgusting.
Just curious....my mortgage was originally with Countrywide. How would I find out if the title is ‘clouded’?...I’m not looking to stop my payments or anything like that...just don’t want to get ripped off in the end.
No one should get a free home but the citizen should be protected from fraud.
Agreed. Did the bank commit fraud when they send out an appraiser that they know will give an overly optimistic appraisal?
And I think you’re making a false distinction between “secured” and “unsecured”.
Yes, there is a question of moral hazard, but at some point you actually have to “do the math”. And it’s not up to the consumer (in a capitalist economy) to “do the math”.
If a lender decides to lend me $5 because I’m pretty or because I give him title to my 1985 Lexus as collarteral is irrelevant. It’s the lender who has to do that math to decide whether or not an ‘85 Lexus will give him back his principle and interest if I can’t pay.
IT’S NOT MY JOB, any more than it’s my job to determine what price Burger King should charge for a Whopper. If BK charges too much, I don’t order a Whopper. If they say “Here’s your Whopper, pay $10 years from now”, it’s not up to me to decide if that “price” will make them money or not.
When I make a legal commitment, I have a moral obligation to follow through. Bankruptcy clears the legal commitment, but the court lacks the moral authority to clear a moral obligation. I don’t see how it could be moral to default by choice, nor do I see any room for discussion on that issue. It is certainly legal and moral to default when you are incapable of satisfying your legal commitment (how could it be immoral to fail in an impossible task?), but to do this as a choice to maximize profit strikes me as the act of a social parasite, not of a decent person. Obtaining clear title is an entirely different question, but it should be settled separately from the question of repaying a valid debt.
Maybe it’s just me, but couldn’t the author have made his point using about 25% of the words he used? And made his sentence structure a little easier to digest?
I shouldn’t have had to work so hard to wade through this seemingly never ending molasses posing as erudition.
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