Mortgage Defaults May Be Driving Consumer Spending

[ralph00]

Its happening at the consumer level - someone who walks away from a $3,500 mortgage payment (we'll leave out re taxes) to rent something for $2,000 has just boosted their retail spending capacity by $1,500 (we know they're not going to save the $).

Someone who defaults on $50K of credit card bills, which had required a minimum monthly payment of $1,000/mo., has just boosted their income by that $1,000/mo.

Someone who declares bankruptcy that wipes away several hundred thousand dollars in debt hanging over their heads, is now free to continue life without that weight.

I'm not condoning this behavior, but this is the way the system works. Its why things like bankruptcy and deed in lieu of foreclosure are so vital to our system.

 

[Daal]

There is no free lunch here, the banks lose money and lend less, small business wont hire and the job crisis continues

 

[Ivanovich]

Quote from Trader666:

You're wrong on both counts. It's not always the "bank's fault." That mindless mantra ignores all the other bad actors... millions of greedy sheeple who got in over their heads, bad monetary policy, pandering politicians who pushed home ownership and made laws that discourage personal responsibility, etc. Now too many are simply taking advantage of the collapse and gaming the system. And banks DO share their profits -- with shareholders, just like any other business does. And please spare me the crap about banks being bailed out by "taxpayers." First, the bailouts wouldn't have been necessary had millions of deadbeat "taxpayers" not crashed the system by defaulting. Second, not all banks needed to be bailed out and some were even forced to take bailout money anyway. Third, the government has profited from the bailouts. And fourth, there shouldn't have been any bailouts to begin with... of corporations or individuals.

+1

 

[shortie]

Quote from Trader666:

You're wrong on both counts. It's not always the "bank's fault." That mindless mantra ignores all the other bad actors... millions of greedy sheeple who got in over their heads, bad monetary policy, pandering politicians who pushed home ownership and made laws that discourage personal responsibility, etc. Now too many are simply taking advantage of the collapse and gaming the system. And banks DO share their profits -- with shareholders, just like any other business does. And please spare me the crap about banks being bailed out by "taxpayers." First, the bailouts wouldn't have been necessary had millions of deadbeat "taxpayers" not crashed the system by defaulting. Second, not all banks needed to be bailed out and some were even forced to take bailout money anyway. Third, the government has profited from the bailouts. And fourth, there shouldn't have been any bailouts to begin with... of corporations or individuals.

it is much more bank's fault that regular joe's. bank is smarter because bank sees ton of numbers, has many people building risk models, etc. a regular joe sees only what's around him. if he held a job for 10 years, he does not expect to lose it next year. neither he expect his wife to lose one.

if the bank lends money to people who can't afford to pay it back, the bank is asking for trouble. yes, it is bank's fault that they were as dumb as a regular joe and had crappy risk models.

i say that everyone who does not want to pay their mortgage should walk away from it NOW, if saving some money in the process is worthwhile losing the credit score.

f*k the banks!

 

[ElCubano]

again the banks SHOULD not have lent out all the money they did to all the people they shouldn't have lent to...we have already been through this.

If a mexican migrant worker getting paid $14,000 a yr is able to buy a house for $750k who's fault is it when he doesn't pay it back? cmon there were tons of these shit loans repakaged and forced to be labled triple A.

 

[clacy]

Quote from misterno:

Why should I share their loss when they lose money on the house?

This is the exact opposite of your view on the health care form and higher taxes correct?

You should reverse your thinking, IMO. Higher taxes and high welfare payouts disincentize people from working hard and taking risks in the market place.

On the flip side, forgiveness of debt (as long as it's still discouraged) encourages risk taking and entrepreneurship. The key is to find the right balance, and I would agree that it might be a little too easy to walk away from your mortgage, but you certainly don't want to cause those who take risks and fail, from being "blackballed" for the remainder of their lives, as that is not good for anyone.

 

[jem]

Quote from ElCubano:

again the banks SHOULD not have lent out all the money they did to all the people they shouldn't have lent to...we have already been through this.

If a mexican migrant worker getting paid $14,000 a yr is able to buy a house for $750k who's fault is it when he doesn't pay it back? cmon there were tons of these shit loans repakaged and forced to be labled triple A.

exactly.

The owners of the banks and wall street firms pursued long term destructive but short term profitable strategies for big stock cashouts and bonuses. The people just reacted as one would expect when they are handed free money.

When your neighbor without a real job was buying a home which was going up 20% a year and you are sitting in a piece of shit rental... at some point when the lennar opens up the new development and mozillo - countrywide says here have this free money I am getting from lehman who is selling to the chinesse who are backstopped by the FED who is backstopped by Dodd and Frank who are who we paid off and who are also getting their lovers jobs at Fannie..... what do you expect would happen.

Everyone profits along the way except for the taxpayer with the real job who is living in the piece of shit rental because he had good parents who taught him good 1950s values.

All these crooks thinks man what a loon - doesn't that guy know the liberals prevented us from being taught values or even judging others starting in the 70s ---what a sucker - you should have gone to b school instead getting a civil engineering degree.

 

[jedwards]

Quote from misterno:

why is the credit score based on the last 7 years? I mean if someone filed bankruptcy 8 years ago, this wouldn't be in their credit report. Why?

Why are people allowed to walk away from homes on which they owe money to the bank? If the home values rise and they sell and make a profit, they do not share with other people. Why should I share their loss when they lose money on the house?

why are so many states have a law restricting seizure of goods by the debtors when the bill is not paid?

I don't understand these

You don't share their loss. In a regular capitalist society, the banks should have taken the losses themselves for faulty risk management. The government has fucked us by rewarding the banks' failures and giving them taxpayers money. This is insanity at its worst.

The reason for the protection from recourse is from way back during the Depression era. Back during the depression, the banks royally fucked over farmers and property owners, forcing them into foreclosure and then forcing them to be in debt for life. Eventually the outrage forced some states to enact laws that protected against this predatory behavior from banks. This is a Good Thing.

People today tend to buy this image that banks are benevolent, whereas in fact, historically, they have always been greedy, sociopathic institutions that fucked over regular people time and time again. The protection from recourse is because of how banks behaved, just like how they behaved recently.

Banks don't make their money from rich people, they make their money from fucking over regular and poor people.

 

[Trader666]

It's always someone else's fault, isn't it? Now I see why you've been on the wrong side of the market for the last year.

Quote from shortie:

it is much more bank's fault that regular joe's. bank is smarter because bank sees ton of numbers, has many people building risk models, etc. a regular joe sees only what's around him. if he held a job for 10 years, he does not expect to lose it next year. neither he expect his wife to lose one.

if the bank lends money to people who can't afford to pay it back, the bank is asking for trouble. yes, it is bank's fault that they were as dumb as a regular joe and had crappy risk models.

i say that everyone who does not want to pay their mortgage should walk away from it NOW, if saving some money in the process is worthwhile losing the credit score.

f*k the banks!

 

[shortie]

Quote from Trader666:

It's always someone else's fault, isn't it? Now I see why you've been on the wrong side of the market for the last year.

not always, but banks are clearly more at fault. in fact, the main reason the average joe lost his job and can't afford the mortgage is also due to banks that created the crisis.