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

[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.

[ucodegen]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

Wrong, we are having to bail out the banks because the banks made the assumption that their side of the risk was covered because RE always goes up. We are having to bail out AIG on credit default swaps because some banks were smart enough to realize that there was a real default risk and that RE does not always go up, while at the same time AIG felt that the credit default swaps were always money-good since RE never goes down.

One of the biggest problems here is that credit default swaps are not regulated as an insurance product while in fact they really are. With a credit default swap, you get paid ‘x’ per month to cover any eventual loss in principal should the loan default. Looks, walks and talks like an insurance product.

Interesting article.. to read, linky thing here.

[ucodegen]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

Wrong, we are having to bail out the banks because the banks made the assumption that their side of the risk was covered because RE always goes up. We are having to bail out AIG on credit default swaps because some banks were smart enough to realize that there was a real default risk and that RE does not always go up, while at the same time AIG felt that the credit default swaps were always money-good since RE never goes down.

One of the biggest problems here is that credit default swaps are not regulated as an insurance product while in fact they really are. With a credit default swap, you get paid ‘x’ per month to cover any eventual loss in principal should the loan default. Looks, walks and talks like an insurance product.

Interesting article.. to read, linky thing here.

[ucodegen]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

Wrong, we are having to bail out the banks because the banks made the assumption that their side of the risk was covered because RE always goes up. We are having to bail out AIG on credit default swaps because some banks were smart enough to realize that there was a real default risk and that RE does not always go up, while at the same time AIG felt that the credit default swaps were always money-good since RE never goes down.

One of the biggest problems here is that credit default swaps are not regulated as an insurance product while in fact they really are. With a credit default swap, you get paid ‘x’ per month to cover any eventual loss in principal should the loan default. Looks, walks and talks like an insurance product.

Interesting article.. to read, linky thing here.

[ucodegen]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

Wrong, we are having to bail out the banks because the banks made the assumption that their side of the risk was covered because RE always goes up. We are having to bail out AIG on credit default swaps because some banks were smart enough to realize that there was a real default risk and that RE does not always go up, while at the same time AIG felt that the credit default swaps were always money-good since RE never goes down.

One of the biggest problems here is that credit default swaps are not regulated as an insurance product while in fact they really are. With a credit default swap, you get paid ‘x’ per month to cover any eventual loss in principal should the loan default. Looks, walks and talks like an insurance product.

Interesting article.. to read, linky thing here.

[ucodegen]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

Wrong, we are having to bail out the banks because the banks made the assumption that their side of the risk was covered because RE always goes up. We are having to bail out AIG on credit default swaps because some banks were smart enough to realize that there was a real default risk and that RE does not always go up, while at the same time AIG felt that the credit default swaps were always money-good since RE never goes down.

One of the biggest problems here is that credit default swaps are not regulated as an insurance product while in fact they really are. With a credit default swap, you get paid ‘x’ per month to cover any eventual loss in principal should the loan default. Looks, walks and talks like an insurance product.

Interesting article.. to read, linky thing here.

[NotCranky]

Good reminder of the fraud Daniel. However, from a buyers perspective,especially an unsophisticated person’s of which there were many, I could see looking at the “fudging” as being desired and encouraged by every single real estate professional they were involved with, all parties up the lending tree and regulators too.

Playing devils advocate,it wasn’t lying, it was adjusting for red tape and inefficiency. Almost everyone was in cahoots. With that knowlege and the security gained from the promises that everything was going to be fine, “houses always go up”,”the thriving economy and inflation is going to drive your earnings through the roof” and the barking about “ownership society”, one could easily glance over the fact that they were exaggerating and only hold themselves responsible, when the gig is up, to realities imposed by the deal, self interest intact. In fact it is because everyone was in cahoots that this is what is happening and will happen. I don’t see how you hold only the borrower liable for what some people call a top down ponzi scheme.

[NotCranky]

Good reminder of the fraud Daniel. However, from a buyers perspective,especially an unsophisticated person’s of which there were many, I could see looking at the “fudging” as being desired and encouraged by every single real estate professional they were involved with, all parties up the lending tree and regulators too.

Playing devils advocate,it wasn’t lying, it was adjusting for red tape and inefficiency. Almost everyone was in cahoots. With that knowlege and the security gained from the promises that everything was going to be fine, “houses always go up”,”the thriving economy and inflation is going to drive your earnings through the roof” and the barking about “ownership society”, one could easily glance over the fact that they were exaggerating and only hold themselves responsible, when the gig is up, to realities imposed by the deal, self interest intact. In fact it is because everyone was in cahoots that this is what is happening and will happen. I don’t see how you hold only the borrower liable for what some people call a top down ponzi scheme.

[NotCranky]

Good reminder of the fraud Daniel. However, from a buyers perspective,especially an unsophisticated person’s of which there were many, I could see looking at the “fudging” as being desired and encouraged by every single real estate professional they were involved with, all parties up the lending tree and regulators too.

Playing devils advocate,it wasn’t lying, it was adjusting for red tape and inefficiency. Almost everyone was in cahoots. With that knowlege and the security gained from the promises that everything was going to be fine, “houses always go up”,”the thriving economy and inflation is going to drive your earnings through the roof” and the barking about “ownership society”, one could easily glance over the fact that they were exaggerating and only hold themselves responsible, when the gig is up, to realities imposed by the deal, self interest intact. In fact it is because everyone was in cahoots that this is what is happening and will happen. I don’t see how you hold only the borrower liable for what some people call a top down ponzi scheme.

[NotCranky]

Good reminder of the fraud Daniel. However, from a buyers perspective,especially an unsophisticated person’s of which there were many, I could see looking at the “fudging” as being desired and encouraged by every single real estate professional they were involved with, all parties up the lending tree and regulators too.

Playing devils advocate,it wasn’t lying, it was adjusting for red tape and inefficiency. Almost everyone was in cahoots. With that knowlege and the security gained from the promises that everything was going to be fine, “houses always go up”,”the thriving economy and inflation is going to drive your earnings through the roof” and the barking about “ownership society”, one could easily glance over the fact that they were exaggerating and only hold themselves responsible, when the gig is up, to realities imposed by the deal, self interest intact. In fact it is because everyone was in cahoots that this is what is happening and will happen. I don’t see how you hold only the borrower liable for what some people call a top down ponzi scheme.

[NotCranky]

Good reminder of the fraud Daniel. However, from a buyers perspective,especially an unsophisticated person’s of which there were many, I could see looking at the “fudging” as being desired and encouraged by every single real estate professional they were involved with, all parties up the lending tree and regulators too.

Playing devils advocate,it wasn’t lying, it was adjusting for red tape and inefficiency. Almost everyone was in cahoots. With that knowlege and the security gained from the promises that everything was going to be fine, “houses always go up”,”the thriving economy and inflation is going to drive your earnings through the roof” and the barking about “ownership society”, one could easily glance over the fact that they were exaggerating and only hold themselves responsible, when the gig is up, to realities imposed by the deal, self interest intact. In fact it is because everyone was in cahoots that this is what is happening and will happen. I don’t see how you hold only the borrower liable for what some people call a top down ponzi scheme.

[analyst]

[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]

The only reason that the lender cannot quickly and effectively close out the situation with a foreclosure sale is because that lender had previously participated (along with the real estate sales force) in convincing the owner-occupant-borrower to overpay for the home.

When people receive punitive damages in court cases, it is not because they “deserve” them. And the fact that they accept them does not make them unethical.

The purpose of the punitive damages concept is to exact a substantial penalty from the party allowing harm to occur, so that they will try seriously not to let it happen again. That is also the purpose of “non-recourse” laws.

In the short run, certain parties receive benefits they may not truly deserve. In the long run, other parties are (hopefully) convinced to refrain from inappropriate activities, to the benefit of the larger community.

[analyst]

[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]

The only reason that the lender cannot quickly and effectively close out the situation with a foreclosure sale is because that lender had previously participated (along with the real estate sales force) in convincing the owner-occupant-borrower to overpay for the home.

When people receive punitive damages in court cases, it is not because they “deserve” them. And the fact that they accept them does not make them unethical.

The purpose of the punitive damages concept is to exact a substantial penalty from the party allowing harm to occur, so that they will try seriously not to let it happen again. That is also the purpose of “non-recourse” laws.

In the short run, certain parties receive benefits they may not truly deserve. In the long run, other parties are (hopefully) convinced to refrain from inappropriate activities, to the benefit of the larger community.

[analyst]

[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]

The only reason that the lender cannot quickly and effectively close out the situation with a foreclosure sale is because that lender had previously participated (along with the real estate sales force) in convincing the owner-occupant-borrower to overpay for the home.

When people receive punitive damages in court cases, it is not because they “deserve” them. And the fact that they accept them does not make them unethical.

The purpose of the punitive damages concept is to exact a substantial penalty from the party allowing harm to occur, so that they will try seriously not to let it happen again. That is also the purpose of “non-recourse” laws.

In the short run, certain parties receive benefits they may not truly deserve. In the long run, other parties are (hopefully) convinced to refrain from inappropriate activities, to the benefit of the larger community.

[analyst]

[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]

The only reason that the lender cannot quickly and effectively close out the situation with a foreclosure sale is because that lender had previously participated (along with the real estate sales force) in convincing the owner-occupant-borrower to overpay for the home.

When people receive punitive damages in court cases, it is not because they “deserve” them. And the fact that they accept them does not make them unethical.

The purpose of the punitive damages concept is to exact a substantial penalty from the party allowing harm to occur, so that they will try seriously not to let it happen again. That is also the purpose of “non-recourse” laws.

In the short run, certain parties receive benefits they may not truly deserve. In the long run, other parties are (hopefully) convinced to refrain from inappropriate activities, to the benefit of the larger community.

[Author]

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