There’s no shame in walking away
Posted on | February 14, 2010 | 1 Comment
Apparently there’s a growing number of people strategically defaulting on their mortgages. Or, at the very least, there’s a growing fear that this is happening. For some commentators, this is a sign of low moral fiber, that the strategic defaulters are somehow breaking their word, losing their honor, etc.
Bullshit.
Housing loans are not based on the belief that the borrower will pay the money back because his honor is at stake. They are based on a contract, which spells out exactly what the lender can do if the borrower stops paying back the loan. The lender can choose to take the house and sue the borrower for the difference between the house’s value and the loan amount (unless it is a non-recourse loan).
There’s also this refrain of unease that not only is the decision to default immoral, but it’s just too easy and trivial to do. That the borrower somehow escapes punishment-free for buying too much house or getting a terrible loan.
But losing your home and getting sued is not a trivial thing. Not to mention the massive hit your credit score will take. For the borrower who defaults, it means that credit will either be unavailable or offered at exorbitant rates. Moreover, employers and landlords often do credit checks prior to hiring or renting, which will further limit the borrower’s options.
Nor is it necessarily easy! The lender has the option to take the home, but no obligation to do so. If there’s a glut of inventory in a particular submarket, a backlog of defaults to process, etc., the lender can choose to send nasty letters to try to get the borrower to pay, but may hold off on actually seizing the property. In the meantime, the borrower still owns the property and any liabilities that go along with it.
Finally, there are those that mention other effects of the foreclosure, such as declining house values and higher borrowing costs within the submarket or economic cohort. But aren’t these effects the natural outcomes of a market? We are coming off a 7 year bubble; houses are going to go into foreclosure, prices will drop, costs will increase, and to expect anything else is insane.
The bottom line is that the decision to take a loss, just as the decision to purchase, should be evaluated rationally by the individuals involved. There are a lot of things to consider beyond the value of your house, the amount of your loan, your monthly income, and the monthly expenses, but morality is not one of them.
iPad for YourMom
Posted on | February 3, 2010 | 3 Comments
The iPad is the answer to your prayers. The funny thing is, it’s the answer to your other prayers.
You’d been hoping that the iPad would do for the niche occupied by netbooks what the iPhone did for cell phones. You were hoping for something revolutionary, something that expands and changes definitions, something that becomes the bar against which every other device is measured. The problem is, it’s just a device. A large iPod Touch. No camera, no GPS, no SD slot, no USB slot, no third-party apps that don’t go through the App Store’s hoops and hurdles. How do you play Rush Poker on Full Tilt on this damn thing? You don’t. No multi-tasking? So either you are on IM, or you are reading email, or you are browsing the web. But not at the same time.
What you’re forgetting–what I forgot–is that this isn’t for you. It’s for your grandma, who’s never owned a computer. Or your mom, who calls you every few months because she’s got another virus or spyware and she only knows this because every time she goes online a dozen ads and porn sites load in popunders. With the iPad, you can get grandma online, and stop being tech support for your mom. Buy the iPad 3G, pay AT&T the $15 a month (with her credit card), and forget about everything else. It’s easily worth $629.
Losers
Posted on | September 25, 2009 | 4 Comments
And the LORD said unto Satan, Behold, all that he hath is in thy power; only upon himself put not forth thine hand. So Satan went forth from the presence of the LORD
Some people seem to be losers. You know the type. For them, nothing ever goes right. They get in car accidents. They lose their jobs. Their payments are late or their bank accounts are overdrawn and they have to pay exorbitant fees. They get parking tickets. Are some people just unlucky? Is God cursing them? Or have they brought it upon themselves?
I just lent Ali $25 on Kiva.org
Posted on | March 6, 2009 | 2 Comments
Oh? You are unfamiliar with Ali? Here’s a little bit about him:
Ali is a 43-year-old man who lives in Saida, southern Lebanon, with his wife and their three children. Ali has been selling fruits and vegetable since 1996. He sells fruits and vegetable from his van, which means he is a mobile salesman. He has requested a loan of 800 US dollars from Al Majmoua in order to purchase vegetables for his business.
This is Ali’s second loan cycle and he has always paid on time. His previous loan helped him diversify his merchandise. His clients are his friends and neighbors, and small markets. When he first started his business, he didn’t have the start-up. He decided on doing his business because of his experience in sales. In the future, he plans on expanding his business.
In case you’re wondering, Nora Rosa Rodríguez Rodríguez, Lan Thi Nguyen, and Dorcas Omokaro are doing okay (17%, 58%, and 88% repaid respectively).
Jaydiohead
Posted on | January 5, 2009 | 1 Comment
Jay-Z vs. Radiohead at Jaydiohead.com
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