Viral Nature of Walking Away

[UCGal]

[quote=davelj][quote=zk]
First of all, most loans are paid back regardless of any moral component. They’re paid back because the consequences of not paying outweigh the consequences of paying. I’d say precious few loans are made where the lender is counting on the moral standards of the borrower.
[/quote]

I agree with your first and second sentences above. Your last sentence is clearly written from the perspective of someone who has never sat on the loan committee of a bank. Yes, you require collateral and cashflow as the fundamental basis for the loan. But if you think that the “character” of the borrower (as explained in court by JP Morgan back in the 1930s) isn’t a big issue, you’re mistaken. (Although, admittedly, the character issue is much more important at the community bank level than at the national bank level.)

[quote=zk]
What changed over the last 7 years
wasn’t moral standards, it was lending standards. If you have adequate lending standards, there will be plenty of loans made and enough of them will be paid back that we won’t end up in a mess like the one we’re in.[/quote]

I will agree with you that it was lending standards that changed MORE than moral standards (among the pool of total borrowers). Lending standards really went into the shitter and I agree that that is indeed the crux of the problem. But it’s pretty clear to me that moral standards have changed too. Although, one could argue that the lax lending standards allowed a large group of folks into the borrowing pool that never should have been there in the first place and gave them every incentive to act in an immoral manner.

Having said all that, I’m clearly biased about this “character” issue because I deal with it all the time. Bank of America, et al, however, probably don’t give it much thought as a result of how their business is run.[/quote]

Character might have played a part in olden days… but when I refi’d last year I never met my mortgage broker in person (it was all on the phone, fax, email.) The underwriter was a nameless person in another state who looked at me from a numbers perspective – I had the income/capacity and good credit and the LTV was less than 50%. Character NEVER came into it – how could it when the only person I met, face to face, during the process, was a notary that came out for doc signing.

How can you tell character? FICO score is about credit worthiness, not character. LTV is about debt levels, not character. Income is about capacity not character. No one asked me my views on paying off debt.

Once the mortgages started being sold off to agencies to be securitized, character stopped being a factor. It was about arbitrary mathematical criteria. And with banks (or brokers) making a percentage of every loan made – but little risk if the loan goes south a few years later – character became a total non issue. Character might matter if the banks actually HELD the paper – but that doesn’t happen anymore.

[briansd1]

[quote=scaredycat] everything in this world has a price. the moral component has probably been quanitified, spliced diced and tranched, and the banks know exactly what that component is worth.[/quote]

After all the banks were doing God’s work. They had PhDs and super duper computers to tell them exactly what everything was worth. Everything was priced into the securities.

I don’t have much sympathy for the banks who already charged for the risk premium, then after the fact, they come back and say “Opps, we didn’t charge enough for the risk.”

[briansd1]

[quote=scaredycat] everything in this world has a price. the moral component has probably been quanitified, spliced diced and tranched, and the banks know exactly what that component is worth.[/quote]

After all the banks were doing God’s work. They had PhDs and super duper computers to tell them exactly what everything was worth. Everything was priced into the securities.

I don’t have much sympathy for the banks who already charged for the risk premium, then after the fact, they come back and say “Opps, we didn’t charge enough for the risk.”

[briansd1]

[quote=scaredycat] everything in this world has a price. the moral component has probably been quanitified, spliced diced and tranched, and the banks know exactly what that component is worth.[/quote]

After all the banks were doing God’s work. They had PhDs and super duper computers to tell them exactly what everything was worth. Everything was priced into the securities.

I don’t have much sympathy for the banks who already charged for the risk premium, then after the fact, they come back and say “Opps, we didn’t charge enough for the risk.”

[briansd1]

[quote=scaredycat] everything in this world has a price. the moral component has probably been quanitified, spliced diced and tranched, and the banks know exactly what that component is worth.[/quote]

After all the banks were doing God’s work. They had PhDs and super duper computers to tell them exactly what everything was worth. Everything was priced into the securities.

I don’t have much sympathy for the banks who already charged for the risk premium, then after the fact, they come back and say “Opps, we didn’t charge enough for the risk.”

[briansd1]

[quote=scaredycat] everything in this world has a price. the moral component has probably been quanitified, spliced diced and tranched, and the banks know exactly what that component is worth.[/quote]

After all the banks were doing God’s work. They had PhDs and super duper computers to tell them exactly what everything was worth. Everything was priced into the securities.

I don’t have much sympathy for the banks who already charged for the risk premium, then after the fact, they come back and say “Opps, we didn’t charge enough for the risk.”

[La Jolla Renter]

Maybe it is a moral obligation to walk away… make the banks, agents, appraisers, investors, and politicians pay dearly for the mess 99% of them created.

Maybe walking away is a moral obligation for the betterment of future generations.

Your house is a place to live in. A place to retire in (without monthly payments). It is not an atm machine to live beyond your means. It is not a place to pull money out so you can go speculate, flip properties and buy a hummer.

I say out with:location, location, location.

and in with: walk, walk, walk

better yet: 30 yr amortization, 30 yr amortization,
30 yr amortization.

FYI, I have mortgages, I rent, I’m a landlord, I have done well investing in 1st and 2nd trust deeds. I have recently been “walked on” on a 1st trust deed that I hold.

I still say walk away.

[La Jolla Renter]

Maybe it is a moral obligation to walk away… make the banks, agents, appraisers, investors, and politicians pay dearly for the mess 99% of them created.

Maybe walking away is a moral obligation for the betterment of future generations.

Your house is a place to live in. A place to retire in (without monthly payments). It is not an atm machine to live beyond your means. It is not a place to pull money out so you can go speculate, flip properties and buy a hummer.

I say out with:location, location, location.

and in with: walk, walk, walk

better yet: 30 yr amortization, 30 yr amortization,
30 yr amortization.

FYI, I have mortgages, I rent, I’m a landlord, I have done well investing in 1st and 2nd trust deeds. I have recently been “walked on” on a 1st trust deed that I hold.

I still say walk away.

[La Jolla Renter]

Maybe it is a moral obligation to walk away… make the banks, agents, appraisers, investors, and politicians pay dearly for the mess 99% of them created.

Maybe walking away is a moral obligation for the betterment of future generations.

Your house is a place to live in. A place to retire in (without monthly payments). It is not an atm machine to live beyond your means. It is not a place to pull money out so you can go speculate, flip properties and buy a hummer.

I say out with:location, location, location.

and in with: walk, walk, walk

better yet: 30 yr amortization, 30 yr amortization,
30 yr amortization.

FYI, I have mortgages, I rent, I’m a landlord, I have done well investing in 1st and 2nd trust deeds. I have recently been “walked on” on a 1st trust deed that I hold.

I still say walk away.

[La Jolla Renter]

Maybe it is a moral obligation to walk away… make the banks, agents, appraisers, investors, and politicians pay dearly for the mess 99% of them created.

Maybe walking away is a moral obligation for the betterment of future generations.

Your house is a place to live in. A place to retire in (without monthly payments). It is not an atm machine to live beyond your means. It is not a place to pull money out so you can go speculate, flip properties and buy a hummer.

I say out with:location, location, location.

and in with: walk, walk, walk

better yet: 30 yr amortization, 30 yr amortization,
30 yr amortization.

FYI, I have mortgages, I rent, I’m a landlord, I have done well investing in 1st and 2nd trust deeds. I have recently been “walked on” on a 1st trust deed that I hold.

I still say walk away.

[La Jolla Renter]

Maybe it is a moral obligation to walk away… make the banks, agents, appraisers, investors, and politicians pay dearly for the mess 99% of them created.

Maybe walking away is a moral obligation for the betterment of future generations.

Your house is a place to live in. A place to retire in (without monthly payments). It is not an atm machine to live beyond your means. It is not a place to pull money out so you can go speculate, flip properties and buy a hummer.

I say out with:location, location, location.

and in with: walk, walk, walk

better yet: 30 yr amortization, 30 yr amortization,
30 yr amortization.

FYI, I have mortgages, I rent, I’m a landlord, I have done well investing in 1st and 2nd trust deeds. I have recently been “walked on” on a 1st trust deed that I hold.

I still say walk away.

[davelj]

[quote=Arraya]Dave, what does “fault” have to do with anything. Nobody makes a decision on whether to keep bubble priced home based on “fault” of a poor market timing decision, that is ridiculous. If they want to and do not, it is not because of the righteousness of unnecessarily punishing themselves for a poor market timing decision. That would be masochistic and insane. [/quote]

This is where we differ and will likely never agree. I’m old fashioned when it comes to debt repayment (and meeting obligations in general where one’s word has been given). I will meet every financial obligation I have, regardless of the inconvenience to me, and regardless of what I could game out of the agreement, right up to the point of having to declare bankruptcy. At that point, the jig is up – there’s a complete inability to pay. No other choice. But prior to that point, I’ll pay. No matter what. I don’t care how many times the loan has been sliced and diced and sold or who owns it – my word is my bond. Period.

If that’s masochistic and insane, then so be it. I try my best to do business with others who are masochistic and insane like me.

[davelj]

[quote=Arraya]Dave, what does “fault” have to do with anything. Nobody makes a decision on whether to keep bubble priced home based on “fault” of a poor market timing decision, that is ridiculous. If they want to and do not, it is not because of the righteousness of unnecessarily punishing themselves for a poor market timing decision. That would be masochistic and insane. [/quote]

This is where we differ and will likely never agree. I’m old fashioned when it comes to debt repayment (and meeting obligations in general where one’s word has been given). I will meet every financial obligation I have, regardless of the inconvenience to me, and regardless of what I could game out of the agreement, right up to the point of having to declare bankruptcy. At that point, the jig is up – there’s a complete inability to pay. No other choice. But prior to that point, I’ll pay. No matter what. I don’t care how many times the loan has been sliced and diced and sold or who owns it – my word is my bond. Period.

If that’s masochistic and insane, then so be it. I try my best to do business with others who are masochistic and insane like me.

[davelj]

[quote=Arraya]Dave, what does “fault” have to do with anything. Nobody makes a decision on whether to keep bubble priced home based on “fault” of a poor market timing decision, that is ridiculous. If they want to and do not, it is not because of the righteousness of unnecessarily punishing themselves for a poor market timing decision. That would be masochistic and insane. [/quote]

This is where we differ and will likely never agree. I’m old fashioned when it comes to debt repayment (and meeting obligations in general where one’s word has been given). I will meet every financial obligation I have, regardless of the inconvenience to me, and regardless of what I could game out of the agreement, right up to the point of having to declare bankruptcy. At that point, the jig is up – there’s a complete inability to pay. No other choice. But prior to that point, I’ll pay. No matter what. I don’t care how many times the loan has been sliced and diced and sold or who owns it – my word is my bond. Period.

If that’s masochistic and insane, then so be it. I try my best to do business with others who are masochistic and insane like me.

[davelj]

[quote=Arraya]Dave, what does “fault” have to do with anything. Nobody makes a decision on whether to keep bubble priced home based on “fault” of a poor market timing decision, that is ridiculous. If they want to and do not, it is not because of the righteousness of unnecessarily punishing themselves for a poor market timing decision. That would be masochistic and insane. [/quote]

This is where we differ and will likely never agree. I’m old fashioned when it comes to debt repayment (and meeting obligations in general where one’s word has been given). I will meet every financial obligation I have, regardless of the inconvenience to me, and regardless of what I could game out of the agreement, right up to the point of having to declare bankruptcy. At that point, the jig is up – there’s a complete inability to pay. No other choice. But prior to that point, I’ll pay. No matter what. I don’t care how many times the loan has been sliced and diced and sold or who owns it – my word is my bond. Period.

If that’s masochistic and insane, then so be it. I try my best to do business with others who are masochistic and insane like me.

[Author]

Posts