MORALITY AND BANKING, OXYMORONS - They're going to foreclose on your house, but don't worry...they'll loan you the money for a used car to live in.
Give him credit, JPMorgan’s CEO of home lending, David Lowman, has found a unique reason for saying no to homeowners who want to renegotiate their mortgages …it’s the moral thing to do. Or in Lowman’s words, “If we rewrite the mortgage contract retroactively to restore equity to any mortgage borrower because the value of his or her home declined, what responsible lender will take the equity risk of financing mortgages in the future.”
I actually agree that borrowers stupid enough to borrow more than they could pay back should take some responsibility for the pickle they’re in. All too often this cavalier attitude toward debt gets people in trouble. It gets lenders and the government in trouble too. Hence, financial meltdown.
The key word in Lowman’s statement is “responsible” as in “responsible lender”. From the get-go lenders have defended their practice of handing out outrageous loan candy to diabetics thusly: “I would say that was probably one of the big misses,” Dimon said. “We stressed almost everything else, but we didn’t see home prices going down 40 percent.”
Liar or Incompetent, You Decide
Mr. Dimon you are clearly lying, incompetent, or a true Nostradumbass – either way one could make a fair argument that whatever obscenely big bonus you got for generating phantom profits wasn’t deserved.
What made you think a clearly overheated mortgage market wouldn’t come crashing down as quickly as it went up? It’s not as if this hadn’t happened before, though granted on a smaller scale. Hell, I’m no financial wizard, but even I could see it coming. So Mr. Dimon, have your people call my people about donating your bonus to me, since I clearly deserve it more.
JPMorgan and the other members of the bank cabal talk “responsibility” as though it’s a one-way street. People invest in banks and accept the risk they might lose money. However, after making bad loans banks now want to ignore the risk and collect the same amount as they’d negotiated before they made that bad decision…from people who obviously can’t pay it.
To do this, they want to foreclose on mortgage holders that fell for their snake oil pitches. In essence, they’re now forcing me to take “responsibility” for their and their borrowers’ poor decisions by foreclosing on homes thereby further depressing the value of mine.
To make matters worse, they’re screwing investors by taking possession of homes that will sell for only a fraction of their value. There’s not much profit in owning a lot of empty houses you can’t sell. And, Lowman’s contention that contracts can’t be rewritten is a pantload. They’re rewritten all the time as part of bankruptcies or when companies have cash flow issues or tanked profits.
However, if you’re a borrower that fell for the bank’s snake oil pitch, shame on you. You can only get taken if you allow yourself to get taken. Otherwise, you get to duck the risk we now want the banks to take on.
There are ways to get out from under the problem, but it requires spreading responsibility around.
Better to Get Money Later Than Not at All
Leave the mortgage holders in their homes and split the difference between what they owe and what the property is worth. Both sides lose something and both sides share the responsibility. Or perhaps extend the terms of loans so homeowners have some chance to pay it off. Better the bank gets its money later than to not get it at all. For the remainder, there’s foreclosure. This happened before the crash and it’s still a useful tool. Nobody wins here, but then life isn’t fair – especially if you ignored the risk.
Of course, there’s no regulation or law that forces banks to act rationally. They can whine and stamp their little wingtips until the cows come home. They have the upper hand legally and aren’t about to say, “Sure, OK. Sounds reasonable.” This is the price America pays for letting banks write regulations that apply to them. So far as I know, there’s no mortgage-holder lobby, but there is a huge banking lobby that seems to view risk as an unknown concept.
Perhaps it’s time for Congress to write reasonable regulations, without the “help” of those who directly benefit from them. And for homeowners to take responsibility for their actions.
Either way, I’m not at fault and I’m being punished.