printDefaulters or deadbeats? As I’ve explained, “You don’t have a property title in the perceived value of your property. Nobody does.” You do, however, have an obligation to honor a contract. These borrowers think otherwise and are proud of themselves for being thieves.
NPR’s Paul Solman tells the story of some homeowners who have stopped paying their mortgages even though they can still afford them: “‘Strategic Defaulters’ Skip Mortgage Payments as Home Values Tumble.”
Many states have no-recourse mortgages. An unintended consequence is that it breeds moral hazard.
Then again, this is the new America where personal responsibility is vilified and parasitic activity considered shrewd thinking.
As for the borrowers who thought they could buy the maximum overpriced home for zero down payment with a negative-amortization bubble rate mortgage – a pox upon them. As for the lender banksters who encouraged this – a pox upon them. As for the Fannie/Freddie/AIG/Goldman “Bundlers” who took these ridiculous mortgages and created hooey Collateralized (hah!!) Default Swaps – a pox upon them. And a pox upon the FHA, Federal Reserve, and the agencies that enouraged this. And a final pox upon the politicians that proudly enabled the whole process – Democrat and Republican.
The bailed-out companies are just defaulters on a larger scale. Sadly, America is a Sodom of dependency and default for people addicted to living beyond their means.
You shouldn’t blame people for acting within the confines of the law. I’d rather focus my biggest guns on criticizing a system that enables them to simply walk away from a contract without any harsh consequences. But I guess Myron already took care of that;)
When you take out a mortgage, the bank doesn’t lend you someone’s savings. It creates (almost all of) the money on the spot. The interest doesn’t pay savers, it pays bankers.
If you lose your job after paying interest on that air-money for ten years and default on the mortgage, the bank ends up owning the property. What did the bank do to earn the property? A few hours of paperwork.
If the bank sells the property for less than the principle owed, you will be responsible for the difference. What caused the drop in nominal property value? The inevitable collapse of prices that were superheated by banks puffing up fractional reserves with derivatives of the superheated asset prices.
When this policy reached its inevitable conclusion as any positive-feedback mechanism must do, who got bailed out? The banks.
Who gets left holding the bag? The public, and the mortgage borrowers.
Yes, people should honor their contracts. But on what level does fraud invalidate a contract? Does general ignorance of how our money system works excuse either party to the contract?
In the end, Thomas Jefferson’s warning about banks issuing currency resulting in homelessness is being proved.
Maybe you can say people should have known better. Maybe when enough people are thrown into destitution because of our monetary system they will wake up to see how their futures have been stolen. Or maybe those who control everything through this power will simply channel the public anger to dupe the public into throwing the last of their liberty away.
No matter how debased the morality of the strategic defaulters, the banks are not any better. The banks are getting paid for their losses with unearned currency. In the end, they end up with the money and the property, too. And they created how much value to earn this?
My problem with the NPR story you linked is that the strategic defaulter, Josh, stopped making payments, but has continued to live in the property for two and half years. Had Josh decided to stop making payments and leave, then I could accept his actions.
Many “strategic defaults” will be met with a rude awakening when, in most states, banks come after the borrower to make the loan whole.
Banks are not following this route at the moment because it requires foreclosing the property first, when they’d have to write it down in their books, exposing the fact that the bank is insolvent if its portfolio is scrutinized.
But the day will come when banks will start foreclosing defaulted mortgages. And there has been an increase in foreclosures in the last 6 months, especially by Bank of America.
Many “wise-guys” are in for a surprise when their finances are destroyed as a result of their reckless actions. Look at it at the contemporary debtors’ prison.
In ANCIENT TIMES when there was a moral capitalist system, a bank would:
(1) Loan money of depositors, not paper pseudomoney borrowed at a “discount rate” from the Federal Reserve Counterfeiters.
(2) Ask for a 20 to 25 percent DOWNPAYMENT to cover free-market house fluctuations on the collateralized SECURED loan covered with home insurance.
(3) Insist on honest assessments, not inflated hype.
(4) ONLY loan to people whose income qualified to make the payments, not selected minorities, veterans, aliens, or charity cases.
And if someone wound up in debt, they would become INDENTURED SERVANTS
working off their debt. An indebted neurosurgeon could work off his debt in a couple of years – $ 300,000 to the bank and $ 20,000 to keep him alive. A gardener’s the debt would require a longer payment time. The servant’s time could be loaned out by the creditor to assure payment. Josh would be sharing a room in a house trailer and his paycheck would go to his creditors with just an allowance to keep him alive until his debts were paid off.
Now we have an addictive universal realm of counterfeiting, debt, and deceit, led by the banksters and their captive politician sock-puppets.
The creation of currency to be loaned out which must be repaid by the creation of real value is fundamentally immoral. The very basis of our economic system is based on dishonesty, transferring wealth to a parasitic class who use unearned debt to control everything. Further, it is designed to fail. All currency springs into being as debt, therefore the debt can never be repaid because the interest must be borrowed into existence, too. By virtue of legal tender and tax laws, the citizens have been sold into perpetual debt servitude.