Financial Team

When I first saw the New York Times Magazine article: Walk Away From Your Mortgage! I had to check to see if the writer was Edmund L. Andrews, but it wasn’t. Rather it was Roger Lowenstein (who will be flogging his book The End of Wall Street this Spring, I am sure).

Mr. Lowenstein encourages the strategic defaulters to hold fast to their decisions to walk away from the mortgage:

There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.

The other reason is that default (supposedly) debases the character of the borrower. Once, perhaps, when bankers held onto mortgages for 30 years, they occupied a moral high ground. These days, lenders typically unload mortgages within days (or minutes). And not just in mortgage finance, but in virtually every realm of our transaction-obsessed society, the message is that enduring relationships count for less than the value put on assets for sale.

Labels: AndrewsBusted

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Tags: Mortgage, Walk Away