Ethics, Mortgages, and Evolution
The NY Times published this article yesterday that examines the ethos of our culture as it relates to homeowner’s who are confronting a home that is now worth less than their mortgage. When I read it I began to think about how our social fabric has evolved along with financial markets.
Fifty years ago a homebuyer would take a mortgage from a local bank who would have then put the loan on their own balance sheet and lived with the consequences. I can imagine that the homeowner had a greater incentive to stay current with payment even if property values declined because they probably did their banking at the same branch that they signed their mortgage papers. Therefore, they’d have to confront the same bankers who would ultimately be negatively impacted by foreclosure.
Today, borrower’s can no longer identify the people who will be negatively impacted by their default. Furthermore, mortgage note holders no longer have the same personal interaction with the people who owe them money. Ever since the birth of securitization the mortgagee/ mortgagor relationship has become depersonalized.
I wonder what impact this has had on creating the current state of the mortgage and housing industry? If you have some thoughts please leave them below.
Posted: January 8th, 2010 under Credit Crisis.
Tags: ethos and mortgages, is there an ethical problem with foreclosure?, moral obliagation to repay mortgage?, shouldI feel oblgiated to repay moy mortgage?
Comments
Comment from JinFL
Time November 23, 2010 at 9:16 pm
I can’t imaging more than one or two times in history if ever when home prices could have dropped by more than 50% in a year. I bought mine for $210K in 2004 and now its barely worth $70K. The bank agreed that it was worth $210. I feel they own some share of the responsibility for their decision to make a loan on an overvalued asset and they should agree to share some of the loss. I would have agreed to a deal on lowered principle. But no, they want it all. Sorry, but I never agreed to buy a property that was overvalued by 300%, I would never borrow $210K on a home worth $70K. I feel shafted. So they’re not getting it from me. Besides why didn’t the trillions of dollars of bailout money go toward this problem?? Wasn’t that supposed to help? If the banks got bailed out why didn’t they pass it on to the investors and why do they still expect us to pay?
Comment from Evan
Time November 24, 2010 at 6:36 am
Janet;
Thanks for commenting on my blog post. You are not alone in your thinking. Many of my clients are unfortunately upside down which is creating a very difficult situation. If you don’t mind, may I play devil’s advocate and ask a question that I’ve heard asked of people who share your thoughts on this topic? You mention in your comment that you feel as though the bank shares in responsibility since they were the ones who conducted the appraisal and agreed to lend you the money on a home that at least in today’s market is overvalued. What if the opposite had taken place and you bought your home in 2000 for $70,000 and then your home appreciated and you could sell it today for $210,000? Would you feel compelled to shared your profit with the bank since they lent you money on a home that was undervalued? If not, is that a double standard?
Pingback from My Mind on Mortgages » Is your mortgage a moral obligation? or simply an economic one?
Time February 5, 2010 at 7:49 am
[...] week I wrote this post in response to an article in the NY Times that addressed the issue of whether or not your mortgage [...]