[quote=montana][quote=spdrun]I mostly agree, but I do think that banks/servicers should show some compassion when exigent circumstances arise.[/quote]
I completely disagree. A borrower signs a note that explains exactly what they are agreeing to. If they fail to meet their end of the bargain then why should there be compassion? The bank, investor or lender has provided their capital for a mortgage, auto, credit card or student loan and they get to dictate the terms of the agreement. They underwrite the credit and if the borrower fails to perform they seize the collateral and send you to collections. A borrower should be prepared for exigent circumstances, they should have a cash reserve that can get them through any hard times, i.e. loss of job, etc.
I’m tired of the whining and complaining of the “predatory” lenders, especially in today’s environment how everybody is underwritten. I didn’t buy my first home until I could afford one. I put 20% down and had another 20% sitting around in cash and equivalents. I had no auto loans, student loans, or credit card debt. I have a HELOC that is not drawn upon. People need to be fiscally responsible and not ask to borrow money unless they are willing to pay for it. If you are a bad credit, be ready for high rates and high origination fees as the lender needs to ensure to cover for your sorry ass when you default.
If you want somebody to help you out for making a bad decision and get through a tough time, go to your family and friends. There is no need for a lender to provide compassion, they are in the business of creating margin, not losses. A servicer is engaged by the lender to perform their role, collect payments and produce a statement, not to listen to sob stories.[/quote]
On an emotional level, I agree with spdrun, but from a purely rational perspective, I agree with HLS and Montana. If we make exceptions for non-payment of mortgages, shouldn’t we also make exceptions for renters (who are traditionally more vulnerable) when they can’t afford to pay their rent for a “good” reason? Should they be allowed to stay in their rentals without paying rent for years and years on end because they lost their jobs or got a divorce? How about car buyers or people who max out their credit cards? People are supposed to build a cushion for themselves for just these reasons, but since so few do, prices are pushed up for everyone…making it more difficult for more responsible people to live within their means.
Ultimately, the idiot buyers/borrowers who stretched to buy — not so much what they couldn’t afford to buy under normal circumstances, but at prices they couldn’t afford when there is a bubble due to speculation and exuberance — make it more difficult for responsible buyers/borrowers to buy affordable homes. The idiots and speculators are the ones who push prices up to such an extent that homes become unaffordable to “regular” people. And they’re the ones who are responsible for the resulting crash, as well.
But I disagree with HLS regarding the culpability of lenders. They are every bit as much to blame as the borrowers. We can’t all be experts in every field, so naive borrowers rely on the advice of “expertise” of mortgage lenders/brokers when they transact these deals. As we all know, many lenders/brokers were misleading about the products they were selling. I’ve seen and heard it myself when I was trying to warn others about the loans they were getting into.
Both borrowers and lenders are to blame, and both should have been allowed to fail so that they could (hopefully) avoid making such stupid decisions in the future. As it stands, with borrowers made out to be victims of unscrupulous lenders, and lenders being painted as victims of an “economic crisis” (which they helped cause…but that’s not often said) or unscrupulous borrowers, we will all have to pay the price for the damage that will result in the future. The crisis is not over yet, we’re just growing it some more and pushing it further into the future.
