Simple business concept…
The NYT columnist explains how big businesses do business: if they get an asset that is under water, they just default on it and allow it to be repossessed. No one in business does the “honorable thing” and service debts where the assets securing the debt are less than the debt. This is partly HOW small-town America is getting stuck with the pain and losses of the big bankers’ excesses.
WHY IT WOULD BE GOOD FOR AMERICA FOR PEOPLE TO WALK AWAY
According to real economists, Americans should just reject this unfair ethic that they honor their underwater mortgages when businesses that funded those mortgages with bad credit derivatives are walking away with credit defaults (and making big profits in doing so!).
If Americans started walking away from their underwater mortgages in larger numbers, according to these economists, the banks and credit derivative holders would be forced to assume some of the burden of the losses and they would be forced to start actually writing down mortgages for people who want to stay in their homes! And that would start eliminating the debt overhang/lending crunch that is crushing American spending, small businesses and consumer businesses.
The message of this article is, don’t even suffer and sacrifice! Don’t crimp and save to pay that mortgage! Just walk away and let the bank eat its losses if it refuses to write down the value of the mortgage to match the value of the house!
Walk Away From Your Mortgage!](http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?ref=magazine)
John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.
Excerpt: http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?ref=magazine