Would you pay your mortgage late to take advantage of Gov. help?

[Piobaire]

Originally Posted by JoelF

Looks like you've bought into the scaremongering that a huge swath of the U.S. population is desperately overleveraged, either unemployed or about to be, and on the brink of homelessness through foreclosure.

Or as the guy that recently pointed out the good news is ~93% of all people are still employed, I was being sarcastic? Just a thought

 

[Piobaire]

Originally Posted by odoreater

I don't buy this stuff about it being an ethical issue. Believe me, neither the bank nor the government have any ethical qualms about bending you over, pulling your pants down, and sticking it to you. The fact that you think your ethics require you to bend over peacefully only makes it that much easier for them.

Originally Posted by odoreater

I can understand paying your mortgage because you can afford to do so comfortably and because it is practical for you to do so, but this idea that some how "I entered into this contract as an educated adult and I'm obligated by my ethics yada yada yada....the banks uphold their side of the agreement, etc. etc." is just nonsense. The bank skewed things so much in their favor and so long ago (and with the aid of government) that I personally don't think it's a question of ethics anymore.

In fact, I don't believe any contracts create ethical obligations. Contracts create legal obligations, and that's the end of it.

In all seriousness, this is why so many people dislike lawyers.

 

[bmulford]

Ethics aside, I also view it from a risk management perspective. Just because the Federal Government is intervening now, doesn't mean that it'll always be the case.

Give it a few years, when these measures only produce more harm than good, and people are screaming for change once again. It wouldn't surprise me if a new administration penalized the folks who are being helped today.

Meeting your obligations free's you from the third-party risk associated with this nonesense.

 

[odoreater]

Originally Posted by Piobaire

In all seriousness, this is why so many people dislike lawyers.

My clients like me just fine.

 

[Piobaire]

Originally Posted by odoreater

My clients like me just fine.

I'm sure they do, and I'm sure you do a great job lawyering for them. From what I've seen of you, I suspect I would have no problems hiring you to represent me or my organization. But seriously, many of us feel an ethical committment that we meet our contractual obligations unless disaster strikes us, and that we do not take the path of least resistance, at the cost of the greater society. I am a social contract type guy, and I do have a sense of what is ethical vs. non-ethical behavior. YMMV.

 

[odoreater]

Originally Posted by Piobaire

I'm sure they do, and I'm sure you do a great job lawyering for them. From what I've seen of you, I suspect I would have no problems hiring you to represent me or my organization. But seriously, many of us feel an ethical committment that we meet our contractual obligations unless disaster strikes us, and that we do not take the path of least resistance, at the cost of the greater society. I am a social contract type guy, and I do have a sense of what is ethical vs. non-ethical behavior. YMMV.

The problem with this viewpoint, as I see it, is that oftentimes both sides are not playing by the same set of rules.

This principal is even recognized in law. For example, contracts are often construed against the drafter, contracts are often construed against the more sophisticated party, contracts are often construed so as not to be against public policy, etc. These rules are put in place because the courts have recognized that there often is not an even playing field between parties to a contract.

Going even further, there is a theory that is gaining some traction called "efficient breach theory." This theory basically says that if it would be more efficient for a party to a contract to just breach the contract and pay damages rather than fully perform the contract, that is what the party ought to do.

When somebody I know well comes to my office and we agree we are going to do something and we spit in the palm of our hand and shake on it, then I feel an ethical obligation to perform that agreement.

But, when a huge bank hires hundreds of lawyers to draft the perfect agreement that insures that if anything goes wrong the bank will be protected and the other party will be fucked, and then basically forces you to sign that agreement without any opportunity to negotiate over the terms of that agreement, I don't think one ought to feel ethically obligated to perform that agreement if breaching the agreement would lead to a more favorable result.

 

[rdawson808]

Originally Posted by odoreater

Going even further, there is a theory that is gaining some traction called "efficient breach theory." This theory basically says that if it would be more efficient for a party to a contract to just breach the contract and pay damages rather than fully perform the contract, that is what the party ought to do.

I'm an economist, have taught Law & Econ, and am familiar with the theory of efficient breach. I still don't believe in it for me, because the basic calculation that you are focusing on is too simple and when you make it more sophisticated, the numbers say "don't breach".

It doesn't include such things as the cost to your reputation. Let's say I stop paying my mortgage and take federal money. What do I tell my friends? What will they think of me? I know I would think less of a friend in a similar situation who did that. What will my mortgage lender think of me as a person when I return for another mortgage. It goes beyond the finances and my credit score.

And what are my own ethics worth? How do I account for my ethics in the calculation? To me they're worth a lot, so that puts a high cost on defaulting.

You obviously don't feel the same.

b

 

[Brutus]

Q: How does helping out those that can't afford their mortgage payments help anyone out? It's time to teach people how to live within their means. We're trying to make it easier for the people who screwed up. If we force them to figure out how to budget on their own (govt could help them learn how to budget) maybe they'll learn something. Something tells me that no matter what happens to me I'm never going to be in a position where I'll actually benefit from government help. It's like being forced to buy insurance you know you'll never need and not being happy with how it performs if you do.

/rant

 

[nate10184]

Originally Posted by Brutus

Q: How does helping out those that can't afford their mortgage payments help anyone out? It's time to teach people how to live within their means. We're trying to make it easier for the people who screwed up. If we force them to figure out how to budget on their own (govt could help them learn how to budget) maybe they'll learn something. Something tells me that no matter what happens to me I'm never going to be in a position where I'll actually benefit from government help. It's like being forced to buy insurance you know you'll never need and not being happy with how it performs if you do.

I actually attended my grandmother's funeral on September 15, 2008. My flight home landed just in time for me to hear about the financial mayhem that was breaking loose. It really made an impression on me. I don't think its a coincidence that this mess is only happening now that that generation is passing on. Say what you want about moral hazard but our grandparents learned brutal lessons in the GD that shaped their risk appetite going forward. I can't say I'm an advocate of a total "scorched earth" policy but people really need to get their hands burned (banks and borrowers) so that this doesn't happen again in our lifetime.

 

[odoreater]

Originally Posted by rdawson808

I'm an economist, have taught Law & Econ, and am familiar with the theory of efficient breach. I still don't believe in it for me, because the basic calculation that you are focusing on is too simple and when you make it more sophisticated, the numbers say "don't breach".

It doesn't include such things as the cost to your reputation. Let's say I stop paying my mortgage and take federal money. What do I tell my friends? What will they think of me? I know I would think less of a friend in a similar situation who did that. What will my mortgage lender think of me as a person when I return for another mortgage. It goes beyond the finances and my credit score.

And what are my own ethics worth? How do I account for my ethics in the calculation? To me they're worth a lot, so that puts a high cost on defaulting.

You obviously don't feel the same.


b

I would say that fear of harm to your reputation is a legitimate reason not to breach contracts, but not because of ethics - more out of practicality.

As far as what your mortgage lender would think of you as a person - the bank gas no problem with bundling your mortgage and selling it to the highest bidder. I know people who get a mortgage statement from a different lender every few months - I don't think these people care what the person who is holding their mortgage this week thinks about them.

I'm not saying ethics are not important, I'm just saying that one ought not give them so much weight when the other guy is stacking the cards in his favor without too much care for ethics.

 

[rdawson808]

Originally Posted by odoreater

I would say that fear of harm to your reputation is a legitimate reason not to breach contracts, but not because of ethics - more out of practicality.

As far as what your mortgage lender would think of you as a person - the bank gas no problem with bundling your mortgage and selling it to the highest bidder.



It's good we can agree to disagree--which is the point we've reached. But just for clarification (and to get the last word in!), the value of holding on to my ethics is separate from the reputation concern. And my mortgage lender doesn't sell it's mortgages.

Now, with fingers in ears... LAH LAH LAH LAH LAH....I CAN'T HEAR YOU...LAH LAH LAH...I CAN'T HEAR YOU...i got the last word.

 

[odoreater]

Last week, I made an electronic transfer of all of the money in one of my bank accounts to another account with a different bank. Instead of doing 1 transfer, for some reason, the bank did 2 transfers, which resulted in my account being overdrawn (i.e., let's say I had $5000, instead of doing 1 transfer of $5000, they did 2 transfers of $5000, so now my account is overdrawn by $5000 plus a $25 fee). Completely their mistake. Nevertheless, they charged me a $25 overdraft fee and are refusing to remove it.

I bet they feel all torn up ethically about charging me money for their mistake and refusing to make good on it. It must also be driving them crazy that I now have already wasted half the morning trying to straighten this out. Maybe I should send them a bill at my hourly rate for the time I wasted today trying to clear this up (and it's still not cleared up).

 

[Piobaire]

In an agreement between two parties, it is possible for only one of those parties to feel the agreement contains not only a legal component, but an ethical component. Also, if you read my first post, my ethical problem is with violating the social contract in general, not a particular contract, with a particular lending organization. The current state of affairs has done nothing, but further convince me, that if more people shared my ethical foundation regarding these things, we would not be in nearly so dire a situation.

 

[odoreater]

Originally Posted by Piobaire

In an agreement between two parties, it is possible for only one of those parties to feel the agreement contains not only a legal component, but an ethical component.

Yes, that party is called the sucker.

I agree with you that if everyone felt the same ethical duty to uphold their bargains, then society would be better off, but, that's not the case, and people get taken left and right because they try to do what's right while the other party is not playing by the same rules.

 

[Piobaire]

Originally Posted by odoreater

Yes, that party is called the sucker.

I agree with you that if everyone felt the same ethical duty to uphold their bargains, then society would be better off, but, that's not the case, and people get taken left and right because they try to do what's right while the other party is not playing by the same rules.

I fine with being referred to as a "sucker." It seems to have served me well in life so far. Part of my personal ethos is that of keeping committments, and it truly serves me well to be known for this in my professional and social circles. Of course, even suckers do not necessarily enter into foolish contracts to begin with, i.e. interest only ARM payment = 50% of my gross income, and even suckers do not allow the same party to take them twice. Due diligence is something I take seriously too.

I also think some people miss the selfish component of committment keeping. It is there, it is selfish, and it is pleasureable.