In Preemptive Defaults I discussed how consumers "trapped in a whirlpool of debt, interest payments, and fees spiraling out of control, finally see the light of preemptive defaults and elect to walk away".
In response, I received an email from "HH" calling me a free market hypocrite. The issue was ethics.
Mish, nothing personal but you sound like a bit of a hypocrite. A strong advocate of free markets and free will unless its inconvenient or doesn't make sense.Really?
Oh, and many of these borrowers "just don't feel like paying anymore". Isn't that special. Yes, I sign a document promising to repay what I borrow but only if it makes sense to me and my American Idol world. If it doesn't, Obama says I can stop repaying and still squat in my home and have it both ways. How lovely.
What a country of losers we are turning into. I only repay a debt when it makes sense to me. Well, in that case what's the point of even signing papers. Just hold up the bank.
On the contrary I have been remarkably consistent. People have the right, but not the obligation to do what is in their best interests.
An exchange of emails later "HH" tells me:
I saw the entire debacle inbound and sold my real estate but now I should subsidize someone else's irresponsibility (even though they are having no problem paying) because "its legal"? Wow. How inspirational. You sound like someone who is devoid of ethics.So here we have it. Housing Hypocrite "HH" gives me a lecture about ethics while admitting he saw the debacle coming and dumped his problems on someone else.
In a nation going down the crapper where people have basically stopped paying their bills even though they incurred them and the federal government and subsidized banking system (and some self-important bloggers) are encouraging economic anarchy you think anyone is going to give a rats ass about a credit score?
"HH" went on to say "Two wrongs do not make a right". Certainly that is a truism. But then again two wrongs and a right does not make three wrongs.
The two wrongs were:
1) Lending institutions made reckless loans.
2) Careless and/or greedy (most likely both) consumers acted irresponsibly.
Act three (what to do next), is independent of acts one and two.
"HH" is in favor of a free market that allows him to dump garbage on someone else at an inflated value, while at the same time criticizing others for amoral behavior by acting in their best interests and legally walking away.
Pray tell, who is the hypocrite?
Followup From You Walk Away
The original post started with an Email from Jon Maddux, CEO of You Walk Away. Here is a followup conversation with Jon:
Jon: CNN called me on Friday to talk about banks walking away from houses. We have several customers this is happening to.
Mish: You have several clients trapped in no man's land with no one wanting the house?
Jon: Yes, we have several clients where the lender either refuses to even file the Notice of Default (NOD), or the lender canceled the foreclosure sale all together. There is one case in particular where the lender just canceled the note and gave the property back to the homeowner. The homeowner doesn't live there unfortunately and doesn't really want the house.
Morals? What Morals?
Is this a question of morals? If so, why are banks allowed to dump properties back into the system leaving cities and states responsible for cleanup?
Clearly there is plenty of blame and finger pointing all around.
Fiduciary Responsibility Enters Into Equation
As an investment advisor, I have a fiduciary responsibility to my clients to tell them what I think is in their financial best interests.
Imagine the results if everyone was bound by such ethics. For starters "HH" would never have been able to unload his garbage on someone else knowing full well the debacle was coming.
Indeed, if Realtors had any sense of fiduciary responsibility towards their clients could housing prices have gotten as high as they did? If consumers and bankers and broker dealers had their clients' best interest at hand would things have gotten so extreme?
Although my fiduciary responsibility extends only to clients and not to this blog, I prefer to have the same set of standards in place for both. In that regard, I have no qualms (indeed I must have no qualms) about telling people what is in their best financial interests as long as it is legal.
Mike "Mish" Shedlock
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