Absolutely everyone was overcharged for housing. How the fuck can you not know this?
The price for the house was an agreement, she wasn’t “charged” anything for it. Overcharging indicates that she was asked to pay more than the agreed amount, which clearly she wasn’t.
cite?
cite that an agreed-upon price can ever be “overcharging”?
Yeah, well, I’d like the credit card company to give me back the rate I willfully signed up for. Are they morally wrong for raising it, just because they can?
no, bud, you willfully signed up for a card product that had variable rates (variable at the discretion of the card issuer) that could be changed according to the contract.
this has what to do with a mortgage, anyway?
Because the bank willfully signed up for a mortgage that specifically allows the borrower to turn over the property to the bank if they don’t want to keep paying the loan. Foreclosure is not a penalty, it is a legal remedy provided for in the mortgage.
And that is Mr. Bud to you, sonny.
When there’s no alternative, that’s when.
At the base of the bubble was a huge demand for assets that were safe, yet paid a decent rate of return. The Wall Street banks met this demand by securitizing mortgages, but there was more demand for these assets than there were mortgages to be securitized in the normal order of business; they wanted more. Mortgage brokers and the like were only happy to oblige, and demanded progressively less substantiation of a borrower’s ability to pay as they realized that the banks were going to gobble it all up. Needless to say, all of this activity, induced by the Wall Street banks, drove up the entire price structure for housing in the United States.
In what sense were people buying houses during the bubble years NOT being overcharged? Sure, people were paying the market price, but the market itself had been massively screwed with by forces well beyond the reckoning of the vast majority of homebuyers.
what do you mean “no alternative” ? no one was forced to buy anything. there are only price increases if there are willing counterparties to pay
why were you even commenting on a post that had nothing to do with you or your asinine contention that foreclosure is not a penalty, merely a “legal remedy” ?
i don’t care for your stupid, sophomoric distinction - i’ll wait for the actual subject of my post to reply further, thanks.
What was the supposed threat here? The bank had already loaned them the money back when they bought the house. How was it going to unloan it?
Including more “air quotes” for emphasis, I presume?
no, they’re actual quotes.
I’m sure you’re right about the way this works in a lot of people’s minds, but rather than using this to justify moral opprobrium, why not simply acknowledge that, just because one case is more up-close and personal than the other doesn’t make it any more morally wrong?
A person who stops paying the mortgage and hand the keys over to the bank is no better and no worse than a business that does something similar. Rather than continuing to inject morality into the situation, we should recognize the action for what it is: a rational business decision that is provided for right there in the terms of the mortgage contract, and which is covered by the law.
I tend to agree that this particular news story did not choose a particularly sympathetic example: a clearly well-off family living in a pretty damn expensive neighborhood, whose house value hasn’t dropped as far (proportionally) as houses in many other areas. But i’m not going to base my whole evaluation of this issue on one case.
As for vilification, there have been multiple occasions over the past couple of years where bankers, government officials, and politicians have berated homeowners who default on their mortgages, and who try to convince them that not paying your mortgage is a moral failing. That’s one of the central points of the article i linked earlier: that buyers have been on the wrong end of a set of asymmetrical moral norms in this whole dispute, and that what should be simply a rational economic decision is turned into a values-laden stick to beat them with.
Exactly.
The government officials and politicians and bankers did not line up to vilify the owners of Stuyvesant Town and Cooper Village when they handed back the keys to their $5.4 billion house. It was treated as exactly what it was: a business decision.
Personally, i’m not too invested in the idea of who is a bastard first. As i said earlier, i’m not looking to attach moral blame in this situation.
But if you’re looking to assign a generalized notion of responsibility for the financial circumstances of the case, why not place some on the bank that was happily handing out loans without making sure that the equity in the house would be enough to cover the bank’s losses in the event of foreclosure?
In the case cited by the OP, if the bank had required a 20 percent deposit, instead of handing over 90 or 05 percent of the purchase price in the mortgage (as it probably did), then it would not currently be in any danger from the family defaulting, because it could still sell the house for more than its current exposure.
As for wanting the deal that they originally agreed to, how often does it need to be pointed out that getting the house is precisely the deal that the bank agreed to when it wilfully entered into the mortgage contract?
This is why banks have an underwriting process for the loans. In more rational times, they made sure that borrowers weren’t borrowing more than they could pay and that the value of the house was more than the loan was for.
Long post, so I just want to note that I hope you’re not lumping me in with the moralizing, finger wavers here. I’m not tsk tsking their decisions in any moral light (any more than I do any other arms-length commercial transaction) whatsoever.
I think Fear Itself kinda has you by the balls here. Either you think, in the case of the credit card company, having them jack up the rates on you despite perfect behavior on your part is acceptable because those are just the terms of the contract, then it’s hard to turn around and blame the homeowner for taking their decision that’s against the spirit of the contract but within the rules. In this case I think they’re both being dicks. But I think blaming the homeowner but leaving the credit card company blameless in these cases is inconsistent.
If someone corners the market on a commodity, and then jacks up the price, are they overcharging or not? The price, after all, is clearly marked.
Banks don’t directly set housing prices. However, if a bank steers a client to a more expensive loan than the client is qualified for, is it overcharging then?
the only think i will say about the moralizers here, though, is that they do have a bit more of a leg to stand on vis-a-vis a strict commercial transaction: the legal rules are indeed skewed greatly in favor of protecting consumers and their homeownership as compared to two business entities and their commercial dealings. it is in that area where there is divergent legal treatment of the two that i think there is ample justification to moralize if one sees fit.
except for the fact that they’re two entirely separate creditors…
Baboonanza’s point was that it’s ok to be a “preemptive bastard” (if I may be so bold as to offer that paraphrase). I was asking what causes the “preemptive possibility” in the case of a mortgage lender with a very structured and well-defined lending agreement.
then I get some non sequitur from F.I. about a credit card company (a completely separate transaction) and then this claptrap about penalties versus remedies.
Fair enough.
But why is it, then, that you seem willing to defend a credit card company for raising interest rates, according to the terms of the contract, but you seem rather critical or suspicious of a homeowner who is willing to turn the keys over to the bank, according to the terms of the contract?
You say that you’re “not tsk tsking their decisions in any moral light,” but you do seem, in fact, to be “tsk tsking” their decision. So, what is the basis for your tsk tsking? If the decision to walk away from their house is financially sound (which it is for many people), i don’t see what basis you have for your criticism other than a moral basis.
ETA:
I’ve just seen your last post, and i think i understand better where you’re coming from. But it’s still not clear to me whether you think there is anything wrong with walking away from a mortgage if it’s in your best financial interest. Do you think that?