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.
Ten Percent
Posted on | November 6, 2009 | No Comments
The Beverly Hills School District Board has a couple new members after Tuesday’s election.
Of the 21,312 registered voters in the 13 City precincts (see page 24 for a map of precincts and voter breakdown), Korbatov came in first by a margin of just nine with 1,907 votes (32.74 percent of total). Manaster came in a close second with 1,892 votes (32.49 percent of total). The other two candidates, current Board President Nooshin Meshkaty had 1,892 votes (26.91 percent of total), while Craig Davis had 458 (7.1 percent of total). 2009 voter turnout has decreased by 1,455 votes over the same election in 2007.
via Beverly Hills Courier: Korbatov, Manaster Win Seats On The School Board, New Majority To Control.
It strikes me as somewhat anti-democratic to allow anyone to take a seat with only a plurality of votes, especially when that plurality represents less than ten percent of the registered voters in the jurisdiction. The fact that two-thirds of the voters didn’t vote for Korbatov should count for something, don’t you think?
What the election means
Posted on | November 4, 2009 | 1 Comment
Yesterday, Republicans won the governor’s races in New Jersey and Virginia, and Democrats won the seat in New York’s 23rd Congressional District. What I’d conclude from these results is:
- Nominate a good candidate that can bring out the base
- Campaign as a centrist to sway the independents
- Run against an incumbent or incumbent party
I know it sounds like an oversimplification, but at least it’s not a gross oversimplification like “This is a referendum on Obama.”
Would you want this woman as your doctor?
Posted on | November 2, 2009 | 3 Comments
A doctor called into the show during a segment on defensive medicine and how much it contributes to health care costs.
“I think, you know, any data that you have, I completely – I can’t possibly think applies to my practice or my husband’s practice or what I’m seeing. Every doctor, every day, practices defensive medicine. There’s no doubt about it.”
Nevermind whether the data is correct or not. Would you want your doctor to rely on anecdotal evidence (her own experience) over data? to refuse to consider data that conflicts with her pre-conceived notions?
Was Joe Wilson motivated by racism?
Posted on | September 20, 2009 | No Comments
I guess we’ll see a lot more of this over the next 3 years, but I’m a little surprised that some people have been so quick to claim that Joe Wilson shouted “You lie!” during Obama’s speech because Obama is black. Okay, maybe I shouldn’t be surprised that Maureen Dowd thinks so:
New York Times: Boy, Oh, Boy by Maureen Dowd
…
The congressman, we learned, belonged to the Sons of Confederate Veterans, led a 2000 campaign to keep the Confederate flag waving above South Carolina’s state Capitol and denounced as a “smear” the true claim of a black woman that she was the daughter of Strom Thurmond, the ’48 segregationist candidate for president. Wilson clearly did not like being lectured and even rebuked by the brainy black president presiding over the majestic chamber.
I’ve been loath to admit that the shrieking lunacy of the summer — the frantic efforts to paint our first black president as the Other, a foreigner, socialist, fascist, Marxist, racist, Commie, Nazi; a cad who would snuff old people; a snake who would indoctrinate kids — had much to do with race.
I tended to agree with some Obama advisers that Democratic presidents typically have provoked a frothing response from paranoids — from Father Coughlin against F.D.R. to Joe McCarthy against Truman to the John Birchers against J.F.K. and the vast right-wing conspiracy against Bill Clinton.
But Wilson’s shocking disrespect for the office of the president — no Democrat ever shouted “liar” at W. when he was hawking a fake case for war in Iraq — convinced me: Some people just can’t believe a black man is president and will never accept it.
….
Other people have come out with columns, statements, and comments along these lines, but I think they’re missing the point. Joe Wilson might be a racist, he might not like black people, but I think it’s more likely that he just couldn’t contain himself during the address because he hates Mexicans.
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