Ethical considerations (none) for defaulting on non-recourse loan.

[SK in CV]

[quote=UCGal]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

Good point UCGal.

The only caveat I would add is that IF the borrower offers a deed in lieu, and lender rejects it (which almost ALWAYS happens), then the onus is shifted back to the lender. If no deed is offered, and the borrower just stays and waits for a foreclosure sale, I agree entirely.

[NotCranky]

[quote=UCGal][quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

What your are talking about UCgal, has possible shades of ethical gray. The “diner and dasher” didn’t put down a payment for a fine steak and get Hamburger. What if the person feels entitled to use the free rent as repayment of the down payment they were “tricked’ into putting into a good sound investment that wasn’t. What if they feel entitled to recoup just for the inconvenience of it all?

I think some people figured that if they could borrow money, it meant it was a good idea because the great U.S. doesn’t do stupid things.Some people trusted. Stretching things a bit, it was even patriotic to get in game. There must be a reason for it all?

We can’t realistically expect that every bubble buyer had an idea of just how foolish the goings on were or how significant the consequences would be(even though piggs did).I don’t think most were trying to game anything from the onset.

Many of the subprime people were immigrant ,first generation homeowners.Some were just very unsophisticated. All the people “analyst” mentions in his opening thread were goading them into buying and lying to them when they asked questions about the viability or the investment.

Just trying to put myself in someone elses shoes.Not sure I want to blame them for taking a break if it is legal , even though I take the idea of personal ethics very seriously.

[NotCranky]

[quote=UCGal][quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

What your are talking about UCgal, has possible shades of ethical gray. The “diner and dasher” didn’t put down a payment for a fine steak and get Hamburger. What if the person feels entitled to use the free rent as repayment of the down payment they were “tricked’ into putting into a good sound investment that wasn’t. What if they feel entitled to recoup just for the inconvenience of it all?

I think some people figured that if they could borrow money, it meant it was a good idea because the great U.S. doesn’t do stupid things.Some people trusted. Stretching things a bit, it was even patriotic to get in game. There must be a reason for it all?

We can’t realistically expect that every bubble buyer had an idea of just how foolish the goings on were or how significant the consequences would be(even though piggs did).I don’t think most were trying to game anything from the onset.

Many of the subprime people were immigrant ,first generation homeowners.Some were just very unsophisticated. All the people “analyst” mentions in his opening thread were goading them into buying and lying to them when they asked questions about the viability or the investment.

Just trying to put myself in someone elses shoes.Not sure I want to blame them for taking a break if it is legal , even though I take the idea of personal ethics very seriously.

[NotCranky]

[quote=UCGal][quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

What your are talking about UCgal, has possible shades of ethical gray. The “diner and dasher” didn’t put down a payment for a fine steak and get Hamburger. What if the person feels entitled to use the free rent as repayment of the down payment they were “tricked’ into putting into a good sound investment that wasn’t. What if they feel entitled to recoup just for the inconvenience of it all?

I think some people figured that if they could borrow money, it meant it was a good idea because the great U.S. doesn’t do stupid things.Some people trusted. Stretching things a bit, it was even patriotic to get in game. There must be a reason for it all?

We can’t realistically expect that every bubble buyer had an idea of just how foolish the goings on were or how significant the consequences would be(even though piggs did).I don’t think most were trying to game anything from the onset.

Many of the subprime people were immigrant ,first generation homeowners.Some were just very unsophisticated. All the people “analyst” mentions in his opening thread were goading them into buying and lying to them when they asked questions about the viability or the investment.

Just trying to put myself in someone elses shoes.Not sure I want to blame them for taking a break if it is legal , even though I take the idea of personal ethics very seriously.

[NotCranky]

[quote=UCGal][quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

What your are talking about UCgal, has possible shades of ethical gray. The “diner and dasher” didn’t put down a payment for a fine steak and get Hamburger. What if the person feels entitled to use the free rent as repayment of the down payment they were “tricked’ into putting into a good sound investment that wasn’t. What if they feel entitled to recoup just for the inconvenience of it all?

I think some people figured that if they could borrow money, it meant it was a good idea because the great U.S. doesn’t do stupid things.Some people trusted. Stretching things a bit, it was even patriotic to get in game. There must be a reason for it all?

We can’t realistically expect that every bubble buyer had an idea of just how foolish the goings on were or how significant the consequences would be(even though piggs did).I don’t think most were trying to game anything from the onset.

Many of the subprime people were immigrant ,first generation homeowners.Some were just very unsophisticated. All the people “analyst” mentions in his opening thread were goading them into buying and lying to them when they asked questions about the viability or the investment.

Just trying to put myself in someone elses shoes.Not sure I want to blame them for taking a break if it is legal , even though I take the idea of personal ethics very seriously.

[NotCranky]

[quote=UCGal][quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)

I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]

What your are talking about UCgal, has possible shades of ethical gray. The “diner and dasher” didn’t put down a payment for a fine steak and get Hamburger. What if the person feels entitled to use the free rent as repayment of the down payment they were “tricked’ into putting into a good sound investment that wasn’t. What if they feel entitled to recoup just for the inconvenience of it all?

I think some people figured that if they could borrow money, it meant it was a good idea because the great U.S. doesn’t do stupid things.Some people trusted. Stretching things a bit, it was even patriotic to get in game. There must be a reason for it all?

We can’t realistically expect that every bubble buyer had an idea of just how foolish the goings on were or how significant the consequences would be(even though piggs did).I don’t think most were trying to game anything from the onset.

Many of the subprime people were immigrant ,first generation homeowners.Some were just very unsophisticated. All the people “analyst” mentions in his opening thread were goading them into buying and lying to them when they asked questions about the viability or the investment.

Just trying to put myself in someone elses shoes.Not sure I want to blame them for taking a break if it is legal , even though I take the idea of personal ethics very seriously.

[Daniel]

Great post, analyst. One comment, though: everything you’re saying holds true only if no fraud or misrepresentation was made in the loan application. I believe, and I strongly believe that, a majority of loans made at the 2005-206 peak involved fraud in one form or another. It could be a vast majority (as in 80% of loans or so). I’m not kidding. A lot of fraud went under the radar.

True story: friend bought house in 2005, he’s OK, no problem paying the loan, everything fine, right? Well, he just refinanced to take advantage of lower rates and noticed that the mortgage broker inflated his income by 40% on the original application. Now, he’s not about to do anything about it, and I’m sure everything will turn out OK for him (he’s got a good job and everything), but think about it for a minute: here is a super-prime guy who’s stunned to find a serious misrepresentation on his loan documents. Want to bet how the subprime / option ARM / stated income / no doc applications look like? Please! Fraud was absolutely overwhelming in those years.

And another story, this time about “morality”: another friend bought in 2005, sold 2008 due to relocation, lost a lot of money in the process. He didn’t short sell, but took out an unsecured loan to pay off his original lender, and he’s now paying back that loan. He’s got very good income, too, but he could have very well walked away. Whether it was a moral or business decison on his part I don’t know (maybe he judged that it’s worth paying to avoid damage to his credit). But here you have it: someone who could have easily walked away, but instead decided to bite the bullet.

[Daniel]

Great post, analyst. One comment, though: everything you’re saying holds true only if no fraud or misrepresentation was made in the loan application. I believe, and I strongly believe that, a majority of loans made at the 2005-206 peak involved fraud in one form or another. It could be a vast majority (as in 80% of loans or so). I’m not kidding. A lot of fraud went under the radar.

True story: friend bought house in 2005, he’s OK, no problem paying the loan, everything fine, right? Well, he just refinanced to take advantage of lower rates and noticed that the mortgage broker inflated his income by 40% on the original application. Now, he’s not about to do anything about it, and I’m sure everything will turn out OK for him (he’s got a good job and everything), but think about it for a minute: here is a super-prime guy who’s stunned to find a serious misrepresentation on his loan documents. Want to bet how the subprime / option ARM / stated income / no doc applications look like? Please! Fraud was absolutely overwhelming in those years.

And another story, this time about “morality”: another friend bought in 2005, sold 2008 due to relocation, lost a lot of money in the process. He didn’t short sell, but took out an unsecured loan to pay off his original lender, and he’s now paying back that loan. He’s got very good income, too, but he could have very well walked away. Whether it was a moral or business decison on his part I don’t know (maybe he judged that it’s worth paying to avoid damage to his credit). But here you have it: someone who could have easily walked away, but instead decided to bite the bullet.

[Daniel]

Great post, analyst. One comment, though: everything you’re saying holds true only if no fraud or misrepresentation was made in the loan application. I believe, and I strongly believe that, a majority of loans made at the 2005-206 peak involved fraud in one form or another. It could be a vast majority (as in 80% of loans or so). I’m not kidding. A lot of fraud went under the radar.

True story: friend bought house in 2005, he’s OK, no problem paying the loan, everything fine, right? Well, he just refinanced to take advantage of lower rates and noticed that the mortgage broker inflated his income by 40% on the original application. Now, he’s not about to do anything about it, and I’m sure everything will turn out OK for him (he’s got a good job and everything), but think about it for a minute: here is a super-prime guy who’s stunned to find a serious misrepresentation on his loan documents. Want to bet how the subprime / option ARM / stated income / no doc applications look like? Please! Fraud was absolutely overwhelming in those years.

And another story, this time about “morality”: another friend bought in 2005, sold 2008 due to relocation, lost a lot of money in the process. He didn’t short sell, but took out an unsecured loan to pay off his original lender, and he’s now paying back that loan. He’s got very good income, too, but he could have very well walked away. Whether it was a moral or business decison on his part I don’t know (maybe he judged that it’s worth paying to avoid damage to his credit). But here you have it: someone who could have easily walked away, but instead decided to bite the bullet.

[Daniel]

Great post, analyst. One comment, though: everything you’re saying holds true only if no fraud or misrepresentation was made in the loan application. I believe, and I strongly believe that, a majority of loans made at the 2005-206 peak involved fraud in one form or another. It could be a vast majority (as in 80% of loans or so). I’m not kidding. A lot of fraud went under the radar.

True story: friend bought house in 2005, he’s OK, no problem paying the loan, everything fine, right? Well, he just refinanced to take advantage of lower rates and noticed that the mortgage broker inflated his income by 40% on the original application. Now, he’s not about to do anything about it, and I’m sure everything will turn out OK for him (he’s got a good job and everything), but think about it for a minute: here is a super-prime guy who’s stunned to find a serious misrepresentation on his loan documents. Want to bet how the subprime / option ARM / stated income / no doc applications look like? Please! Fraud was absolutely overwhelming in those years.

And another story, this time about “morality”: another friend bought in 2005, sold 2008 due to relocation, lost a lot of money in the process. He didn’t short sell, but took out an unsecured loan to pay off his original lender, and he’s now paying back that loan. He’s got very good income, too, but he could have very well walked away. Whether it was a moral or business decison on his part I don’t know (maybe he judged that it’s worth paying to avoid damage to his credit). But here you have it: someone who could have easily walked away, but instead decided to bite the bullet.

[Daniel]

Great post, analyst. One comment, though: everything you’re saying holds true only if no fraud or misrepresentation was made in the loan application. I believe, and I strongly believe that, a majority of loans made at the 2005-206 peak involved fraud in one form or another. It could be a vast majority (as in 80% of loans or so). I’m not kidding. A lot of fraud went under the radar.

True story: friend bought house in 2005, he’s OK, no problem paying the loan, everything fine, right? Well, he just refinanced to take advantage of lower rates and noticed that the mortgage broker inflated his income by 40% on the original application. Now, he’s not about to do anything about it, and I’m sure everything will turn out OK for him (he’s got a good job and everything), but think about it for a minute: here is a super-prime guy who’s stunned to find a serious misrepresentation on his loan documents. Want to bet how the subprime / option ARM / stated income / no doc applications look like? Please! Fraud was absolutely overwhelming in those years.

And another story, this time about “morality”: another friend bought in 2005, sold 2008 due to relocation, lost a lot of money in the process. He didn’t short sell, but took out an unsecured loan to pay off his original lender, and he’s now paying back that loan. He’s got very good income, too, but he could have very well walked away. Whether it was a moral or business decison on his part I don’t know (maybe he judged that it’s worth paying to avoid damage to his credit). But here you have it: someone who could have easily walked away, but instead decided to bite the bullet.

[Veritas]

I think you need to put aside the fact taxpayers’ money is involved for a number of reasons. Many of the Piggs do not support the War(s) started by Bush and continued by Obama, yet we pay our taxes. I do not like giving aid to terrorist nations and yet I pay taxes. I agree with the post regarding fraud in the loan application and not having it both ways: not paying, but living there free. It is a complex situation. I am not going to judge anyone for doing what they consider best for their family in any given situation if it is their own home and not one of many investments bought to flip. I have little to no sympathy for people who bought multiple properties with no money down and made liar loans to buy them. They helped create the bubble as did banks and lenders who did not do due diligence when approving their loans.

[Veritas]

I think you need to put aside the fact taxpayers’ money is involved for a number of reasons. Many of the Piggs do not support the War(s) started by Bush and continued by Obama, yet we pay our taxes. I do not like giving aid to terrorist nations and yet I pay taxes. I agree with the post regarding fraud in the loan application and not having it both ways: not paying, but living there free. It is a complex situation. I am not going to judge anyone for doing what they consider best for their family in any given situation if it is their own home and not one of many investments bought to flip. I have little to no sympathy for people who bought multiple properties with no money down and made liar loans to buy them. They helped create the bubble as did banks and lenders who did not do due diligence when approving their loans.

[Veritas]

I think you need to put aside the fact taxpayers’ money is involved for a number of reasons. Many of the Piggs do not support the War(s) started by Bush and continued by Obama, yet we pay our taxes. I do not like giving aid to terrorist nations and yet I pay taxes. I agree with the post regarding fraud in the loan application and not having it both ways: not paying, but living there free. It is a complex situation. I am not going to judge anyone for doing what they consider best for their family in any given situation if it is their own home and not one of many investments bought to flip. I have little to no sympathy for people who bought multiple properties with no money down and made liar loans to buy them. They helped create the bubble as did banks and lenders who did not do due diligence when approving their loans.

[Veritas]

I think you need to put aside the fact taxpayers’ money is involved for a number of reasons. Many of the Piggs do not support the War(s) started by Bush and continued by Obama, yet we pay our taxes. I do not like giving aid to terrorist nations and yet I pay taxes. I agree with the post regarding fraud in the loan application and not having it both ways: not paying, but living there free. It is a complex situation. I am not going to judge anyone for doing what they consider best for their family in any given situation if it is their own home and not one of many investments bought to flip. I have little to no sympathy for people who bought multiple properties with no money down and made liar loans to buy them. They helped create the bubble as did banks and lenders who did not do due diligence when approving their loans.

[Author]

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