Saturday, February 06, 2010

The Integrity Meme

This keeps coming up. As I've mentioned before, backing out of a no recourse mortgage is perfectly OK if your house's value has dropped below the outstanding mortgage, i.e. if you're 'underwater.' Even if you can make the payments, it's not your problem. The bank was also gambling, and they should have been way more aware of the economic environment than you.

I just wanted to make that point. Even though former Secretary Paulsen is largely discredited, his assertion that "people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than 'speculators'" is maintaining some cultural currency.

I'll make the point again -- walking away from an underwater mortgage is the right thing to do. You're already propping up the banks through your tax dollars, you don't need to do it with your housing payments.

Not all home loans are non-recourse. It sounds sleazy, but some banks look past their culpability in approving frankly insane loans and go after the borrower. This was predictable, but it's a fad -- once this drives, say, 1.5 million people into bankruptcy I think the Federal Government will stop it. Say, 2013. Oo! Next president! I don't want to go out on a limb here, but I think it'll be Obama.

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