Viral Nature of Walking Away

[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”!

[davelj]

[quote=scaredycat]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![/quote]

Doesn’t it vary by who did what to whom and who promised what to whom? Who can make a blanket statement about divorce? (Just as I wouldn’t make a blanket statement regarding defaulting borrowers – it depends on the situation, as I’ve noted.)

The larger problem, of course, is that any discussion of morality is not unlike a discussion about religion… there isn’t much definitive right or wrong. It’s just a bunch of opinions.

[davelj]

[quote=scaredycat]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![/quote]

Doesn’t it vary by who did what to whom and who promised what to whom? Who can make a blanket statement about divorce? (Just as I wouldn’t make a blanket statement regarding defaulting borrowers – it depends on the situation, as I’ve noted.)

The larger problem, of course, is that any discussion of morality is not unlike a discussion about religion… there isn’t much definitive right or wrong. It’s just a bunch of opinions.

[davelj]

[quote=scaredycat]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![/quote]

Doesn’t it vary by who did what to whom and who promised what to whom? Who can make a blanket statement about divorce? (Just as I wouldn’t make a blanket statement regarding defaulting borrowers – it depends on the situation, as I’ve noted.)

The larger problem, of course, is that any discussion of morality is not unlike a discussion about religion… there isn’t much definitive right or wrong. It’s just a bunch of opinions.

[davelj]

[quote=scaredycat]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![/quote]

Doesn’t it vary by who did what to whom and who promised what to whom? Who can make a blanket statement about divorce? (Just as I wouldn’t make a blanket statement regarding defaulting borrowers – it depends on the situation, as I’ve noted.)

The larger problem, of course, is that any discussion of morality is not unlike a discussion about religion… there isn’t much definitive right or wrong. It’s just a bunch of opinions.

[davelj]

[quote=scaredycat]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![/quote]

Doesn’t it vary by who did what to whom and who promised what to whom? Who can make a blanket statement about divorce? (Just as I wouldn’t make a blanket statement regarding defaulting borrowers – it depends on the situation, as I’ve noted.)

The larger problem, of course, is that any discussion of morality is not unlike a discussion about religion… there isn’t much definitive right or wrong. It’s just a bunch of opinions.

[davelj]

[quote=pabloesqobar]

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]

Basically, yes.

[quote=pabloesqobar]
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]

We’re discussing the morality and obligations of various parties to the financial crisis. Goldman Sachs is definitely one of those parties. Consequently, I’d say it’s very relevant.

[quote=pabloesqobar]
[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?[/quote]

I made it up. You asked my opinion and I gave it to you.

[quote=pabloesqobar]
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.[/quote]

Actually, I’d be more than happy to offer a FULL personal guarantee on ANY AND ALL debt obligations that I enter into, including any mortgages that don’t otherwise require it. Although I certainly wouldn’t delay a transaction just to change the verbiage of an agreement that excluded my personal guarantee, as is. Does that answer your question?

[davelj]

[quote=pabloesqobar]

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]

Basically, yes.

[quote=pabloesqobar]
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]

We’re discussing the morality and obligations of various parties to the financial crisis. Goldman Sachs is definitely one of those parties. Consequently, I’d say it’s very relevant.

[quote=pabloesqobar]
[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?[/quote]

I made it up. You asked my opinion and I gave it to you.

[quote=pabloesqobar]
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.[/quote]

Actually, I’d be more than happy to offer a FULL personal guarantee on ANY AND ALL debt obligations that I enter into, including any mortgages that don’t otherwise require it. Although I certainly wouldn’t delay a transaction just to change the verbiage of an agreement that excluded my personal guarantee, as is. Does that answer your question?

[davelj]

[quote=pabloesqobar]

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]

Basically, yes.

[quote=pabloesqobar]
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]

We’re discussing the morality and obligations of various parties to the financial crisis. Goldman Sachs is definitely one of those parties. Consequently, I’d say it’s very relevant.

[quote=pabloesqobar]
[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?[/quote]

I made it up. You asked my opinion and I gave it to you.

[quote=pabloesqobar]
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.[/quote]

Actually, I’d be more than happy to offer a FULL personal guarantee on ANY AND ALL debt obligations that I enter into, including any mortgages that don’t otherwise require it. Although I certainly wouldn’t delay a transaction just to change the verbiage of an agreement that excluded my personal guarantee, as is. Does that answer your question?

[davelj]

[quote=pabloesqobar]

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]

Basically, yes.

[quote=pabloesqobar]
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]

We’re discussing the morality and obligations of various parties to the financial crisis. Goldman Sachs is definitely one of those parties. Consequently, I’d say it’s very relevant.

[quote=pabloesqobar]
[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?[/quote]

I made it up. You asked my opinion and I gave it to you.

[quote=pabloesqobar]
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.[/quote]

Actually, I’d be more than happy to offer a FULL personal guarantee on ANY AND ALL debt obligations that I enter into, including any mortgages that don’t otherwise require it. Although I certainly wouldn’t delay a transaction just to change the verbiage of an agreement that excluded my personal guarantee, as is. Does that answer your question?

[davelj]

[quote=pabloesqobar]

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]

Basically, yes.

[quote=pabloesqobar]
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]

We’re discussing the morality and obligations of various parties to the financial crisis. Goldman Sachs is definitely one of those parties. Consequently, I’d say it’s very relevant.

[quote=pabloesqobar]
[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?[/quote]

I made it up. You asked my opinion and I gave it to you.

[quote=pabloesqobar]
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.[/quote]

Actually, I’d be more than happy to offer a FULL personal guarantee on ANY AND ALL debt obligations that I enter into, including any mortgages that don’t otherwise require it. Although I certainly wouldn’t delay a transaction just to change the verbiage of an agreement that excluded my personal guarantee, as is. Does that answer your question?

[davelj]

[quote=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.
[/quote]

Probably true. Although even to this day, every banker is *supposed* to be underwriting to the “Three C’s of Credit”: Character, Capital and Capacity. (So, this idea of “character” in the lending function isn’t something I’m making up – just to be clear – it’s in every lender’s training manual, to be ignored at his or her own peril.)

Unfortunately, during the ’00s, the three C’s morphed into: Collateral Creates Character. That turned out to be incorrect.

[davelj]

[quote=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.
[/quote]

Probably true. Although even to this day, every banker is *supposed* to be underwriting to the “Three C’s of Credit”: Character, Capital and Capacity. (So, this idea of “character” in the lending function isn’t something I’m making up – just to be clear – it’s in every lender’s training manual, to be ignored at his or her own peril.)

Unfortunately, during the ’00s, the three C’s morphed into: Collateral Creates Character. That turned out to be incorrect.

[davelj]

[quote=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.
[/quote]

Probably true. Although even to this day, every banker is *supposed* to be underwriting to the “Three C’s of Credit”: Character, Capital and Capacity. (So, this idea of “character” in the lending function isn’t something I’m making up – just to be clear – it’s in every lender’s training manual, to be ignored at his or her own peril.)

Unfortunately, during the ’00s, the three C’s morphed into: Collateral Creates Character. That turned out to be incorrect.

[davelj]

[quote=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.
[/quote]

Probably true. Although even to this day, every banker is *supposed* to be underwriting to the “Three C’s of Credit”: Character, Capital and Capacity. (So, this idea of “character” in the lending function isn’t something I’m making up – just to be clear – it’s in every lender’s training manual, to be ignored at his or her own peril.)

Unfortunately, during the ’00s, the three C’s morphed into: Collateral Creates Character. That turned out to be incorrect.

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