Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.
However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.
I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.
Geez!
They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.
When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.
