I am disgusted to be living in an era when so many people are forging a new 'morality' of walking away from their contractual obligations; and - what's worse - when they are being encouraged to do so. Respect for contracts, property protection, and common decency seem to have been (unintentionally?) sacrificed in an effort to bail out mistakes big and small. Having seen high risk activity (corporate and private) 'rescued' by those taxpayers who have made prudent decisions, is it any wonder that the marginal homeowner is now more likely than ever to think it is OK to simply not re-pay the debt?
I don't know how it is possible to read these quotes from the New York Times without some sense of despair about the morality that has been encouraged by the moral hazard that well-intentioned actions have put in front of the nation's borrowers:
During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.
"... the more money you borrowed, the less likely you will have to pay up.
“It rewards immorality, to some extent.”
“Americans seem to believe that anything they can get away with is O.K.”
Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.
Fewer than 5 percent of these clients said they would continue paying their home equity loan no matter what. ... 85 percent said they would default and worry about the debt only if and when they were forced to.
“It’s come to the point where morality is no longer an issue.”
“I’m kind of banking on there being too many of us for the lenders to pursue,” [a defaulted homeowner] said. “There is strength in numbers.”
(Read the entire article from the NYT here)
Who here really thinks that this is a way to build a great society?
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