Mortgages and morality

I thought this was a rather interesting story. (Short version: law professor advises mortgagees whose properties are “underwater” simply to walk away from their homes and stop paying for them.)

The most interesting part was where he chastises the “social control” of homeowners by the power structure, who has hit the public hard about the “morality” of stiffing the banks. Predictably, the banks have thrown up their hands in dismay that anyone would be so wicked:

[Brian Faith of Fannie Mae] said, “there’s a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community.”

If there is in fact a moral dimension to homeowners acting in their own self-interest, wouldn’t you agree with me that it’s absolutely horrific that the poor bankers are completely powerless to prevent it happening? Powerless, I tell you! All they can do is to sit by helplessly and get nothing of their investment back, rather than, I don’t know, a moderately reduced amount just by agreeing to negotiate with the terrorists homeowners.

And so the banks are forced to “contribute to the [immoral] destabilization of their neighborhood and community.” Personally, of course, I blame ACORN.

2 thoughts on “Mortgages and morality

  1. As well you should, Dale, as well you should.

    Damn acorn.

    Just the other day, I found what I thought was a weed growing in my container garden. But noooooo. It was a filthy acorn, attempting to assert itself into a tree. Which brings me to the next culprit: squirrels.

    Interesting how your post (and therefore presumably the linked article) ascribes no moral weight to the idea of a bank making bad (and therefore risky) loans. That would, of course, be silly. Everyone knows the only reason a loan would go bad is because of deadbeat borrowers.

    The reason I never read the linked article was simple: Interest charged on a loan (at least by any organization not ran by complete fools) includes a component (and often a large one) reflecting the RISK inherent in the loan. Failure to appropriately price this risk results in bank failure. As it should. Unless someone bails the bank out…. oh, wait….

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