Sunday, January 27, 2008

Nothing to Discourage Borrowers from "Gaming the System"

Another blow to the body of the housing market (and ultimately to the American economy) is the distinct probability that thousands of borrowers will simply walk away from their homes and their obligation to pay back their mortgages without fear of repercussion:
There is a certain cold logic to just walking away ....

Most of the people who lost the houses didn’t lose any money because they never put any money down. Though their credit is damaged, and they could face legal action in some circumstances, they got to live in a new house for a couple of years, and some of them even managed to get some money with home equity loans or by refinancing ....

as mortgages became securitized and Wall Street became involved, they became very transactional and there was no relationship built with the borrower and the lender. And I think that makes it easier for someone to see it as an anonymous party at the other end of the transaction and just walk away from it.
The subprime mortgage process fostered greed on all sides of the lending process. And the anonymous business of high finances, in what looks like a farcical, cynical incarnation of a Weberian "iron cage," never fostered personal (that is, face-to-face) accountability.

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