Viral Nature of Walking Away

[scaredyclassic]

Ok you’re against marriages I’m against mortgages but they both still exist. Do you really think it is immoral to divorce? That sounds really olde-fashioned!

[PCinSD]

[quote=davelj]

Let me summarize your argument here: What’s legal is moral. (If the contract allows for it, then it is legal and therefore also moral.) And I disagree with this position. Call me crazy, but I think legality and morality are two different issues.[/quote]

Not exactly. I somewhat addressed this issue when I mentioned how many of our laws are based on moral standards. They can be one and the same, and usually are. In this situation, my opinion is that they are one and the same. There is a long line of case law that addresses the importance of real estate contracts being reduced to writing. It’s mandatory. You enter the transaction presupposing that the remedy allowed upon default is moral. It was agreed to by both parties.

I get the feeling (I could be wrong) that you feel the same moral standard applies to the real estate scenario being discussed, to that of promising to pay someone to do a job. They do the job, but you don’t pay them. You broke your word, ipso facto immoral. No different than walking on a non-recourse home loan?

[quote=davelj] I think we’ll find that most of what Goldman did during the crisis was legal. Do you think we’ll also find that it was moral? Do you distinguish between the two? [/quote]

I don’t know enough about the minutiae of the rules/practice regarding their behavior to opine on their morality. And I don’t think it’s relevant to our current scenario.

[quote=davelj] Sure. When their current income can’t support the payments and they’re down to their last $5K. [/quote]

How did you come up with that?

And, I’ll assume that NO, you will not be begging to make sure that all further real estate contracts you enter into will only be moral ones.

[PCinSD]

[quote=davelj]

Let me summarize your argument here: What’s legal is moral. (If the contract allows for it, then it is legal and therefore also moral.) And I disagree with this position. Call me crazy, but I think legality and morality are two different issues.[/quote]

Not exactly. I somewhat addressed this issue when I mentioned how many of our laws are based on moral standards. They can be one and the same, and usually are. In this situation, my opinion is that they are one and the same. There is a long line of case law that addresses the importance of real estate contracts being reduced to writing. It’s mandatory. You enter the transaction presupposing that the remedy allowed upon default is moral. It was agreed to by both parties.

I get the feeling (I could be wrong) that you feel the same moral standard applies to the real estate scenario being discussed, to that of promising to pay someone to do a job. They do the job, but you don’t pay them. You broke your word, ipso facto immoral. No different than walking on a non-recourse home loan?

[quote=davelj] I think we’ll find that most of what Goldman did during the crisis was legal. Do you think we’ll also find that it was moral? Do you distinguish between the two? [/quote]

I don’t know enough about the minutiae of the rules/practice regarding their behavior to opine on their morality. And I don’t think it’s relevant to our current scenario.

[quote=davelj] Sure. When their current income can’t support the payments and they’re down to their last $5K. [/quote]

How did you come up with that?

And, I’ll assume that NO, you will not be begging to make sure that all further real estate contracts you enter into will only be moral ones.

[PCinSD]

[quote=davelj]

Let me summarize your argument here: What’s legal is moral. (If the contract allows for it, then it is legal and therefore also moral.) And I disagree with this position. Call me crazy, but I think legality and morality are two different issues.[/quote]

Not exactly. I somewhat addressed this issue when I mentioned how many of our laws are based on moral standards. They can be one and the same, and usually are. In this situation, my opinion is that they are one and the same. There is a long line of case law that addresses the importance of real estate contracts being reduced to writing. It’s mandatory. You enter the transaction presupposing that the remedy allowed upon default is moral. It was agreed to by both parties.

I get the feeling (I could be wrong) that you feel the same moral standard applies to the real estate scenario being discussed, to that of promising to pay someone to do a job. They do the job, but you don’t pay them. You broke your word, ipso facto immoral. No different than walking on a non-recourse home loan?

[quote=davelj] I think we’ll find that most of what Goldman did during the crisis was legal. Do you think we’ll also find that it was moral? Do you distinguish between the two? [/quote]

I don’t know enough about the minutiae of the rules/practice regarding their behavior to opine on their morality. And I don’t think it’s relevant to our current scenario.

[quote=davelj] Sure. When their current income can’t support the payments and they’re down to their last $5K. [/quote]

How did you come up with that?

And, I’ll assume that NO, you will not be begging to make sure that all further real estate contracts you enter into will only be moral ones.

[PCinSD]

[quote=davelj]

Let me summarize your argument here: What’s legal is moral. (If the contract allows for it, then it is legal and therefore also moral.) And I disagree with this position. Call me crazy, but I think legality and morality are two different issues.[/quote]

Not exactly. I somewhat addressed this issue when I mentioned how many of our laws are based on moral standards. They can be one and the same, and usually are. In this situation, my opinion is that they are one and the same. There is a long line of case law that addresses the importance of real estate contracts being reduced to writing. It’s mandatory. You enter the transaction presupposing that the remedy allowed upon default is moral. It was agreed to by both parties.

I get the feeling (I could be wrong) that you feel the same moral standard applies to the real estate scenario being discussed, to that of promising to pay someone to do a job. They do the job, but you don’t pay them. You broke your word, ipso facto immoral. No different than walking on a non-recourse home loan?

[quote=davelj] I think we’ll find that most of what Goldman did during the crisis was legal. Do you think we’ll also find that it was moral? Do you distinguish between the two? [/quote]

I don’t know enough about the minutiae of the rules/practice regarding their behavior to opine on their morality. And I don’t think it’s relevant to our current scenario.

[quote=davelj] Sure. When their current income can’t support the payments and they’re down to their last $5K. [/quote]

How did you come up with that?

And, I’ll assume that NO, you will not be begging to make sure that all further real estate contracts you enter into will only be moral ones.

[PCinSD]

[quote=davelj]

Let me summarize your argument here: What’s legal is moral. (If the contract allows for it, then it is legal and therefore also moral.) And I disagree with this position. Call me crazy, but I think legality and morality are two different issues.[/quote]

Not exactly. I somewhat addressed this issue when I mentioned how many of our laws are based on moral standards. They can be one and the same, and usually are. In this situation, my opinion is that they are one and the same. There is a long line of case law that addresses the importance of real estate contracts being reduced to writing. It’s mandatory. You enter the transaction presupposing that the remedy allowed upon default is moral. It was agreed to by both parties.

I get the feeling (I could be wrong) that you feel the same moral standard applies to the real estate scenario being discussed, to that of promising to pay someone to do a job. They do the job, but you don’t pay them. You broke your word, ipso facto immoral. No different than walking on a non-recourse home loan?

[quote=davelj] I think we’ll find that most of what Goldman did during the crisis was legal. Do you think we’ll also find that it was moral? Do you distinguish between the two? [/quote]

I don’t know enough about the minutiae of the rules/practice regarding their behavior to opine on their morality. And I don’t think it’s relevant to our current scenario.

[quote=davelj] Sure. When their current income can’t support the payments and they’re down to their last $5K. [/quote]

How did you come up with that?

And, I’ll assume that NO, you will not be begging to make sure that all further real estate contracts you enter into will only be moral ones.

[danielwis]

I believe that when you enter into a financial agreement, you have an obligation to pay that debt. That is how I was raised.

However, I would not fault anyone from walking away from a severely depressed property. The banks knew that they were writing loans that were going to head south. Some (Goldman Sachs) even shorted those same loan products at the same time they were writing them. By doing so, they doomed the real estate industry to its eventual fate, not just the sub-prime borrowers that were unlikely to meet these loan obligations.

When enter into an agreement with a dishonest or fraudulent entity, the entire equation changes, IMO.

[danielwis]

I believe that when you enter into a financial agreement, you have an obligation to pay that debt. That is how I was raised.

However, I would not fault anyone from walking away from a severely depressed property. The banks knew that they were writing loans that were going to head south. Some (Goldman Sachs) even shorted those same loan products at the same time they were writing them. By doing so, they doomed the real estate industry to its eventual fate, not just the sub-prime borrowers that were unlikely to meet these loan obligations.

When enter into an agreement with a dishonest or fraudulent entity, the entire equation changes, IMO.

[danielwis]

I believe that when you enter into a financial agreement, you have an obligation to pay that debt. That is how I was raised.

However, I would not fault anyone from walking away from a severely depressed property. The banks knew that they were writing loans that were going to head south. Some (Goldman Sachs) even shorted those same loan products at the same time they were writing them. By doing so, they doomed the real estate industry to its eventual fate, not just the sub-prime borrowers that were unlikely to meet these loan obligations.

When enter into an agreement with a dishonest or fraudulent entity, the entire equation changes, IMO.

[danielwis]

I believe that when you enter into a financial agreement, you have an obligation to pay that debt. That is how I was raised.

However, I would not fault anyone from walking away from a severely depressed property. The banks knew that they were writing loans that were going to head south. Some (Goldman Sachs) even shorted those same loan products at the same time they were writing them. By doing so, they doomed the real estate industry to its eventual fate, not just the sub-prime borrowers that were unlikely to meet these loan obligations.

When enter into an agreement with a dishonest or fraudulent entity, the entire equation changes, IMO.

[danielwis]

I believe that when you enter into a financial agreement, you have an obligation to pay that debt. That is how I was raised.

However, I would not fault anyone from walking away from a severely depressed property. The banks knew that they were writing loans that were going to head south. Some (Goldman Sachs) even shorted those same loan products at the same time they were writing them. By doing so, they doomed the real estate industry to its eventual fate, not just the sub-prime borrowers that were unlikely to meet these loan obligations.

When enter into an agreement with a dishonest or fraudulent entity, the entire equation changes, IMO.

[edna_mode]

One other dimension to this discussion of “character” with regard to approval of mortgage loans: historically, this was an “dog whistle” word, an excuse on the part of the (usually older white male) bankers to continue the practice of redlining (using geographic maps to determine eligibility for loans that were segregated, usually by race). My understanding is that the Civil Rights Act of 1968 was really the “Fair Housing Act”, and MLK’s economic basis against racism was specifically fighting against institutional economic behaviors such as redlining. In fact, in that sense, credit scores were viewed as an impartial remedy against discriminating against things like race or gender — a metric that was supposed to be an omnibus characteristic that was transparently and equitably applied to all, that would not permit an individual’s discriminatory powers to overrule what a computer put out. And that’s led to some interesting unintended consequences.

So in some ways, we’ve mercifully forgotten what exactly those people in supposedly halcyon earlier days meant by “character”, and thought they meant what we mean today. Would that it always meant “projected ability and willingness to live up to a contract”!

[edna_mode]

One other dimension to this discussion of “character” with regard to approval of mortgage loans: historically, this was an “dog whistle” word, an excuse on the part of the (usually older white male) bankers to continue the practice of redlining (using geographic maps to determine eligibility for loans that were segregated, usually by race). My understanding is that the Civil Rights Act of 1968 was really the “Fair Housing Act”, and MLK’s economic basis against racism was specifically fighting against institutional economic behaviors such as redlining. In fact, in that sense, credit scores were viewed as an impartial remedy against discriminating against things like race or gender — a metric that was supposed to be an omnibus characteristic that was transparently and equitably applied to all, that would not permit an individual’s discriminatory powers to overrule what a computer put out. And that’s led to some interesting unintended consequences.

So in some ways, we’ve mercifully forgotten what exactly those people in supposedly halcyon earlier days meant by “character”, and thought they meant what we mean today. Would that it always meant “projected ability and willingness to live up to a contract”!

[edna_mode]

One other dimension to this discussion of “character” with regard to approval of mortgage loans: historically, this was an “dog whistle” word, an excuse on the part of the (usually older white male) bankers to continue the practice of redlining (using geographic maps to determine eligibility for loans that were segregated, usually by race). My understanding is that the Civil Rights Act of 1968 was really the “Fair Housing Act”, and MLK’s economic basis against racism was specifically fighting against institutional economic behaviors such as redlining. In fact, in that sense, credit scores were viewed as an impartial remedy against discriminating against things like race or gender — a metric that was supposed to be an omnibus characteristic that was transparently and equitably applied to all, that would not permit an individual’s discriminatory powers to overrule what a computer put out. And that’s led to some interesting unintended consequences.

So in some ways, we’ve mercifully forgotten what exactly those people in supposedly halcyon earlier days meant by “character”, and thought they meant what we mean today. Would that it always meant “projected ability and willingness to live up to a contract”!

[edna_mode]

One other dimension to this discussion of “character” with regard to approval of mortgage loans: historically, this was an “dog whistle” word, an excuse on the part of the (usually older white male) bankers to continue the practice of redlining (using geographic maps to determine eligibility for loans that were segregated, usually by race). My understanding is that the Civil Rights Act of 1968 was really the “Fair Housing Act”, and MLK’s economic basis against racism was specifically fighting against institutional economic behaviors such as redlining. In fact, in that sense, credit scores were viewed as an impartial remedy against discriminating against things like race or gender — a metric that was supposed to be an omnibus characteristic that was transparently and equitably applied to all, that would not permit an individual’s discriminatory powers to overrule what a computer put out. And that’s led to some interesting unintended consequences.

So in some ways, we’ve mercifully forgotten what exactly those people in supposedly halcyon earlier days meant by “character”, and thought they meant what we mean today. Would that it always meant “projected ability and willingness to live up to a contract”!

[Author]

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