Posts Tagged ‘Strategic Default’

There are several excellent points in this article. First, debts that cannot be repaid won’t be. A person underwater by tens or hundreds of thousands of dollars is eventually going to default (the majority of them anyway). There are exceptions, bust most will not stand by and pay a premium for years on end while their neighbors pay a fraction of the cost for the same housing. Further, as the banks are bailed out again and again and no relief is given to the homeowner, default becomes palatable.

Second, the government has sacrificed our economy to the banks profit. The bailouts and continued programs purported to “help homeowners” – themselves just thinly veiled bailout vehicles for the banks – can be characterized in no other way.

Finally, the government as a sovereign entity holds absolute power over the corporation. That they have not forced resolution only backs up the second point; the economy takes a back seat to corporate profit and political power.

This will not end well. Instead, it will end in the destruction of millions of financial futures.

Millions of lives have been financially ruined (through some fault of their own, to be sure…but there are contributing macro factors). Millions more will be ruined as they struggle to hold on and continue to pay their mortgages in the hope the banks and politicians will act to stem the tide, rather than profit from it.

Read the whole thing.



 This is being touted as good news.  It is not.  For relative chump change, these banks will be indemnified for their crimes.  The same banks will then charge fees, recouped from the payout no doubt, to help a limited number of people. Be assured they are right now looking for any loophole that will allow them an out.    Be also assured their friends in the judicial and legislative systems are helping insert more of the same loopholes. 

 Damn criminals.  That’s all I have to say about that.

 As always, Mish has great words.  However, the comment thread is even better than Mish’s post…it gets deep fast.

…this is no surprise to me.  It is the inevitable outcome of the policy of Congress and the Fed to bailout the corporations and not mandate any action to mitigate the impact to the consumer.  In doing so, they broke the rule of law and the spirit of fairness in our country.  I have no issue whatsoever with a homedebtor who chooses to strategically default; the bank would do the same in a heartbeat if it made sense for their balance sheet.  Turnabout is fair play.

…parallel to the fantastic breakdown of this issue on Synthetic Assets, my wife and I were watching the Today show this morning when the issue of mortgage rates and refinancing came up.  According to the analyst being interviewed, the key to refinancing if you are more than 125% underwater is to pay down your mortgage.  Never mind that if you’re that far underwater, there are no actual programs that will allow you to refinance excepting the VA loan.  Further, no one is going to drop tens of thousands of dollars against a mortgage that is underwater to such an extent, for the reasons Synthetic Assets details.

So long as people labor under the false impression they owe the banks their very lives, the banks will continue down this path (with their politicians happily lapping at their feet).