Is it moral to walk away from your home loan?

Lots and lots of homeowners are “underwater.” That is, they owe more on their houses than they are worth.  Brett Arends, writing in the Wall Street Journal, says that it’s okay to walk away from loans like that.  Here is his argument:

Millions of Americans are now deeply underwater on their mortgage. If you”re among them, you need to stop living in a dream world and give serious thought to walking away from the debt.

No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first.

How widespread is this? More than 11 million families are in “negative equity”—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That’s a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That’s true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so?

It’s time for some tough talk.

Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one. . . .

If you are reluctant to give up on “your” home, realize that it isn’t “yours.” If you are in negative equity, it’s the bank’s home. You’re just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow.

Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think. . . .

Sure, a strategic foreclosure may hurt your credit score. But if you’re in financial difficulties, it's probably already suffered. And your credit score is not the only thing in life that matters.

Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it’s wrong to abandon their obligations. They don’t want to be a deadbeat.

Your instincts, while honorable, are leading you astray.

The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.

Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?

They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they’ve gotten away with it. And if they thought your loan was “risk free,” how come they were charging you so much more than the interest on Treasury bonds? . . .

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn’t have to give back one cent of that money when the companies went into bankruptcy.

Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They’re not shy about protecting themselves if things go wrong. You shouldn’t be either.

via ROI: When It’s OK to Walk Away From Your Home – WSJ.com.

So because lenders would squeeze you, it’s all right not to pay them what you owe?  That makes no moral sense.  What about the contract you signed?  Keeping your word is apparently not as morally compelling as it used to be.  Also–to get both Kantian and very practical–if everyone who is underwater did as this article suggests, if  the dilemma  is as widespread as the author says it is, then the whole economy would come crashing down.  And who would that help?

I’m not saying that defaulting on a loan may not be a tragic necessity sometimes. Those who can’t pay their mortgages and so lose their homes are not morally to blame. Neither are those who must sell their homes at a loss that they are unable to make up. I’m just saying that there is surely a moral problem when someone who can keep up the payments just walks away from the obligation. After all, he was prepared to make those payments when he signed the mortgage papers. The loss isn’t real unless he has to sell.

Also, if he walks away from his home, where is he going to live now? His credit will be ruined so he can’t just buy another house. He can rent. But how is that an improvement over what he had before?

That we could consider our housing costs to be something we will get all back and then some, to the point of that our house becomes not an expense but our major money-making investment is surely an anomaly in human history. Still, it’s hard to be in this predicament. Any suggestions, wise advice, or consolations?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Pete

    I once heard it said (regrettably, I can’t recall the source – I believe it was an economist) that every economic event or transaction is a moral one. Trading my money which, after all, represents my labor for something I consider to be of some value. Whether that be a pack of gum or a baseball team. Or a home loan. The assertion of the fundamental amorality of the economy is a little troubling to me.

  • Pete

    I once heard it said (regrettably, I can’t recall the source – I believe it was an economist) that every economic event or transaction is a moral one. Trading my money which, after all, represents my labor for something I consider to be of some value. Whether that be a pack of gum or a baseball team. Or a home loan. The assertion of the fundamental amorality of the economy is a little troubling to me.

  • Peter Leavitt

    Brent Arends is arguing from the strictly homo economicus view. The truth is that one has a moral obligation to adhere to a contract that ought only be broken when one has not the means to fulfill it, necessitating bankruptcy.

  • Peter Leavitt

    Brent Arends is arguing from the strictly homo economicus view. The truth is that one has a moral obligation to adhere to a contract that ought only be broken when one has not the means to fulfill it, necessitating bankruptcy.

  • http://fivepintlutheran.blogspot.com/ David Cochrane

    There is more at stake then the “evil” lenders losing some money. They will not in the long view lose a dime. To forfeit on a loan is stealing from any future borrowers this will be passed on to others.

    1.Our government will pass out more ADC, Aid for Dependent Corporations, payments to help reduce the loss for the foolish lenders.

    2. Investors in the lending schemes will lose. More retirees will lose retirement funds than have already.

    3. Employees of the investment banks will lose income by frozen wages and possible firings.

    The list goes on and on. Very few realize that a house is not a get rich quick scheme but rather a place to reside. Even if a person is in negative equity over time the loan is paid down and one will have positive equity and eventually can actually be refinanced to lower payment or paid off. And it may just cause suffering. Cancelling vacations, shut off cable service, telling children they cannot have the latest toys etc. Oh dear!

    Now there is an unAmercan ideal. Paid off loans.

  • http://fivepintlutheran.blogspot.com/ David Cochrane

    There is more at stake then the “evil” lenders losing some money. They will not in the long view lose a dime. To forfeit on a loan is stealing from any future borrowers this will be passed on to others.

    1.Our government will pass out more ADC, Aid for Dependent Corporations, payments to help reduce the loss for the foolish lenders.

    2. Investors in the lending schemes will lose. More retirees will lose retirement funds than have already.

    3. Employees of the investment banks will lose income by frozen wages and possible firings.

    The list goes on and on. Very few realize that a house is not a get rich quick scheme but rather a place to reside. Even if a person is in negative equity over time the loan is paid down and one will have positive equity and eventually can actually be refinanced to lower payment or paid off. And it may just cause suffering. Cancelling vacations, shut off cable service, telling children they cannot have the latest toys etc. Oh dear!

    Now there is an unAmercan ideal. Paid off loans.

  • Lisa

    People should stop viewing their houses as investments and start thinking of them just as a place to live.

  • Lisa

    People should stop viewing their houses as investments and start thinking of them just as a place to live.

  • Winston Smith

    Does anyone else remember those old commercials for Hebrew National kosher hot dogs in which a smiling Uncle Sam tempts the manufacturers to adulterate their product? “The government says we can add cereal fillers to our hot dogs … but we don’t. We answer to a higher authority.”

    In the same fashion, the Christian must answer to a higher authority. Even when there is an argument to be made for what the lawyers would call strategic breach of a contract, the Christian must show the honesty and fidelity that adorns the doctrine of God (Titus 2:10).

    How can Christians be salt and light to their society if they act in a “fundamentally amoral” way like everyone else?

  • Winston Smith

    Does anyone else remember those old commercials for Hebrew National kosher hot dogs in which a smiling Uncle Sam tempts the manufacturers to adulterate their product? “The government says we can add cereal fillers to our hot dogs … but we don’t. We answer to a higher authority.”

    In the same fashion, the Christian must answer to a higher authority. Even when there is an argument to be made for what the lawyers would call strategic breach of a contract, the Christian must show the honesty and fidelity that adorns the doctrine of God (Titus 2:10).

    How can Christians be salt and light to their society if they act in a “fundamentally amoral” way like everyone else?

  • Doug

    I am reminded of Psalm 37:21

    21 “The wicked borrows but does not pay back…” ESV

    “Wicked” is a strong word that should get our attention.

  • Doug

    I am reminded of Psalm 37:21

    21 “The wicked borrows but does not pay back…” ESV

    “Wicked” is a strong word that should get our attention.

  • Carl Vehse

    It depends on the terms of the mortgage to which both parties agree what is to be done under various circumstances.

    The same applies to company pension plans and what both parties agree to do in those plans. Or warranty agreements on purchased vehicles, equipment, etc. Or the agreement you sign with a bank when you put money in a savings account. Or what patients, doctors, and hospitals agree to in surgical concent forms.

    All of these agreements are written or studied carefully by both parties before they are signed.

  • Carl Vehse

    It depends on the terms of the mortgage to which both parties agree what is to be done under various circumstances.

    The same applies to company pension plans and what both parties agree to do in those plans. Or warranty agreements on purchased vehicles, equipment, etc. Or the agreement you sign with a bank when you put money in a savings account. Or what patients, doctors, and hospitals agree to in surgical concent forms.

    All of these agreements are written or studied carefully by both parties before they are signed.

  • Joe

    Depending on where you live, it is also a bad economic decision. Many states allow the bank to take the collateral (house) and sue you for the deficiency left after they sell the home.

    Now let me ask this, how is this any more immoral than a person filing for bankruptcy protection? Is it because it is aimed at a single asset? In a bankruptcy all kinds of contracts are voided, judgments are erased, etc.

  • Joe

    Depending on where you live, it is also a bad economic decision. Many states allow the bank to take the collateral (house) and sue you for the deficiency left after they sell the home.

    Now let me ask this, how is this any more immoral than a person filing for bankruptcy protection? Is it because it is aimed at a single asset? In a bankruptcy all kinds of contracts are voided, judgments are erased, etc.

  • Dave

    With banks and lending institutions failing at a high rate, I find it surprising that someone thinks they don’t lose money when people default on their loans.

    As to the original question, I can’t believe people default just because they are underwater on their mortgages. It takes a boat load of rationalizations to not see that as immoral.

  • Dave

    With banks and lending institutions failing at a high rate, I find it surprising that someone thinks they don’t lose money when people default on their loans.

    As to the original question, I can’t believe people default just because they are underwater on their mortgages. It takes a boat load of rationalizations to not see that as immoral.

  • Winston Smith

    Joe @8: “Now let me ask this, how is this any more immoral than a person filing for bankruptcy protection?”

    Your question assumes that filing for bankruptcy is immoral. It is not, because 1) the law allows it, and both buyer and seller, lender and borrower, are on notice that a discharge in bankruptcy is always a possibility and 2) there is a Scriptural basis for official debt forgiveness (see Lev. 25:10-17, concerning the Year of Jubilee).

    While some people file for bankruptcy strategically, running up debts and wickedly refusing to pay them, many more are forced into bankruptcy by personal injury, illness or other devastating circumstances.

  • Winston Smith

    Joe @8: “Now let me ask this, how is this any more immoral than a person filing for bankruptcy protection?”

    Your question assumes that filing for bankruptcy is immoral. It is not, because 1) the law allows it, and both buyer and seller, lender and borrower, are on notice that a discharge in bankruptcy is always a possibility and 2) there is a Scriptural basis for official debt forgiveness (see Lev. 25:10-17, concerning the Year of Jubilee).

    While some people file for bankruptcy strategically, running up debts and wickedly refusing to pay them, many more are forced into bankruptcy by personal injury, illness or other devastating circumstances.

  • Jay

    It may not be as you think. Read your loan papers. Home loans are collateralized loans. Most collateralized loan holders agree to do one of two things. Pay the money as indicated in the agreement OR give up the collateral in the same shape, or better, than when the deal was made.

    Returning collateral is not the same as filing bankruptcy. Payment is one way to fulfill the terms of the contract. Return of collateral is another way.

    I’ve not read the terms of YOUR loan agreement, so what’s true of the loans I’ve had, may not be true of yours. I made down payments, many underwater homeowners didn’t.

  • Jay

    It may not be as you think. Read your loan papers. Home loans are collateralized loans. Most collateralized loan holders agree to do one of two things. Pay the money as indicated in the agreement OR give up the collateral in the same shape, or better, than when the deal was made.

    Returning collateral is not the same as filing bankruptcy. Payment is one way to fulfill the terms of the contract. Return of collateral is another way.

    I’ve not read the terms of YOUR loan agreement, so what’s true of the loans I’ve had, may not be true of yours. I made down payments, many underwater homeowners didn’t.

  • http://humblemusings.com Amy Scott

    First, kudos for talking about it. I think the issue is a pressing one for many Christians today.

    However, I must take issue with the premise. Since the contract is using the house as collateral for the loan, giving back the house is just exercising that option in your contract. It is perfectly legal and moral.

    Until now, the banks have made out like bandits when people give back their houses. Until 2007, giving back the house was not immoral. On the contrary, the bank made out sweetly, as it had the house, your down payment, and several years of interest. The contract was written to protect the bank; you lose every time.

    Except that the smart banks didn’t foresee the housing bubble (but bloggers in their basements did)….

    Now, because the bank loses, it’s suddenly immoral?

    When the two enter into a contract, they both take a risk. The bank is making an investment, not a moral nice gesture. For the first time now, banks are on the “losing” end of the deal, and so now it’s immoral? (Watch the video in the link if you tend to feel sorry about the banks over taxpayers.)

    Forever until now, it wasn’t immoral to give back a $100k loan on a house that could fetch $100,000 on the open market that you paid down 20% and interest for years. When the bank made the loan, the bank bet that the house would still fetch 100k, but…..they bet wrong.

    Exercising your explicit option in the contract to give back the house is not illegal or immoral. Up until now, the banks have made huge gambles, with wins 100% of the time. Now they have to take their pretend losses, we are burdening Christians with “moral obligation”?

    Thanks for talking about the issue; I’m still not with you there, though.

    Disclosure: My houses are paid off.

  • http://humblemusings.com Amy Scott

    First, kudos for talking about it. I think the issue is a pressing one for many Christians today.

    However, I must take issue with the premise. Since the contract is using the house as collateral for the loan, giving back the house is just exercising that option in your contract. It is perfectly legal and moral.

    Until now, the banks have made out like bandits when people give back their houses. Until 2007, giving back the house was not immoral. On the contrary, the bank made out sweetly, as it had the house, your down payment, and several years of interest. The contract was written to protect the bank; you lose every time.

    Except that the smart banks didn’t foresee the housing bubble (but bloggers in their basements did)….

    Now, because the bank loses, it’s suddenly immoral?

    When the two enter into a contract, they both take a risk. The bank is making an investment, not a moral nice gesture. For the first time now, banks are on the “losing” end of the deal, and so now it’s immoral? (Watch the video in the link if you tend to feel sorry about the banks over taxpayers.)

    Forever until now, it wasn’t immoral to give back a $100k loan on a house that could fetch $100,000 on the open market that you paid down 20% and interest for years. When the bank made the loan, the bank bet that the house would still fetch 100k, but…..they bet wrong.

    Exercising your explicit option in the contract to give back the house is not illegal or immoral. Up until now, the banks have made huge gambles, with wins 100% of the time. Now they have to take their pretend losses, we are burdening Christians with “moral obligation”?

    Thanks for talking about the issue; I’m still not with you there, though.

    Disclosure: My houses are paid off.

  • Lance

    Interesting that few of us walk away from our new car loans, even though the minute we drive off the lot they are worth less, sometimes dramatically less, than our purchase price… The more I examine my own financial mistakes the more I am becoming an anti-debt guy, perhaps even with homes.

    “The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7, ESV)

  • Lance

    Interesting that few of us walk away from our new car loans, even though the minute we drive off the lot they are worth less, sometimes dramatically less, than our purchase price… The more I examine my own financial mistakes the more I am becoming an anti-debt guy, perhaps even with homes.

    “The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7, ESV)

  • http://www.drunkenkoudou.com Stewart K. Lundy

    I’m with Amy on this one.

    In every contract, both parties must offer something as collateral. Though illegal, banks lend out multiple dollars for every single dollar deposited — and this amount they pretend is their act of faith. Since the money is fabricated, it is illegal. Since it didn’t exist until the loan was signed, it couldn’t have been offered beforehand unlike the car I offer as collateral.

    Banks have exploited people and been “victimized” by the recession. Bank CEOs, making disproportionately large salaries meant to fail because they 1) keep their money, and 2) keep their business. The government simply bails them out. And as for the mortgages they were forced to give to people who couldn’t pay them back? They now own incredibly more property than ever before. Not paying back one’s mortgage makes state-controlled banks more powerful; paying back one’s mortgage makes them more powerful (through interest). If the market were just, we would still be able to buy a home at twice the price of our annual income. Banks are largely criminal institutions, but what can we do about that? No clue.

  • http://www.drunkenkoudou.com Stewart K. Lundy

    I’m with Amy on this one.

    In every contract, both parties must offer something as collateral. Though illegal, banks lend out multiple dollars for every single dollar deposited — and this amount they pretend is their act of faith. Since the money is fabricated, it is illegal. Since it didn’t exist until the loan was signed, it couldn’t have been offered beforehand unlike the car I offer as collateral.

    Banks have exploited people and been “victimized” by the recession. Bank CEOs, making disproportionately large salaries meant to fail because they 1) keep their money, and 2) keep their business. The government simply bails them out. And as for the mortgages they were forced to give to people who couldn’t pay them back? They now own incredibly more property than ever before. Not paying back one’s mortgage makes state-controlled banks more powerful; paying back one’s mortgage makes them more powerful (through interest). If the market were just, we would still be able to buy a home at twice the price of our annual income. Banks are largely criminal institutions, but what can we do about that? No clue.

  • http://wipfandstock.com/store/As_Though_It_Were_Actually_True_A_Christian_Apologetics_Primer Matt C.

    This is just the natural result of utilitarianism. Somewhere along the line, we’ve forgotten that it’s better to suffer evil than to commit it.

    Amy & Stewart,

    Repaying the loan by offering up the collateral is understood as the penalty part of the contract. Submitting to the penalty does not make defaulting a morally acceptable option anymore than submitting to 20 years in prison makes murder a morally acceptable option.

  • http://wipfandstock.com/store/As_Though_It_Were_Actually_True_A_Christian_Apologetics_Primer Matt C.

    This is just the natural result of utilitarianism. Somewhere along the line, we’ve forgotten that it’s better to suffer evil than to commit it.

    Amy & Stewart,

    Repaying the loan by offering up the collateral is understood as the penalty part of the contract. Submitting to the penalty does not make defaulting a morally acceptable option anymore than submitting to 20 years in prison makes murder a morally acceptable option.

  • http://mesamike.org Mike Westfall

    Does the Bible have anything at all to say about collateralized “loans” like mortgages.

    See, a mortgage isn’t exactly the moral equivalent of borrowing a cup of sugar from your neighbor.

  • http://mesamike.org Mike Westfall

    Does the Bible have anything at all to say about collateralized “loans” like mortgages.

    See, a mortgage isn’t exactly the moral equivalent of borrowing a cup of sugar from your neighbor.

  • Joe

    Wintson @ 5 – I did not express my thought clearly enough. I am not making the assumption that bankruptcy is immoral. In fact, I don’t believe that it is. The alternative: debtor’s prison strikes me as a much greater moral problem.

    My question (put more clearly) is why is this different? But you help further make my point by your defense of bankruptcy. Turning over the collateral of a loan is also allowed by law, the buyer and the seller and the lender are all on notice that it could happen. And the year of jubilee is just as analogous to this as it is to bankruptcy. It is about the lender forgiving.

    So, why should this be analyzed differently from a bankruptcy?

  • Joe

    Wintson @ 5 – I did not express my thought clearly enough. I am not making the assumption that bankruptcy is immoral. In fact, I don’t believe that it is. The alternative: debtor’s prison strikes me as a much greater moral problem.

    My question (put more clearly) is why is this different? But you help further make my point by your defense of bankruptcy. Turning over the collateral of a loan is also allowed by law, the buyer and the seller and the lender are all on notice that it could happen. And the year of jubilee is just as analogous to this as it is to bankruptcy. It is about the lender forgiving.

    So, why should this be analyzed differently from a bankruptcy?

  • Nana

    We are in this situation right now- in our 50s after living in our house 15 years- we refied to pay off some debt (student loans for my daughter, credit cards) when we still had equity in the home about 2 1/2 years ago, with the plan of refying later to get a better rate and ultimately selling the home for retirement. Well, that plan is out the window- we can’t even sell for what we got the house for 15 years ago. Now, we are supposed to stay in a home that is eating us alive not only with huge mortgage and insurance payments, but with upkeep (we have put in new windows, A/C, roof, painted twice and done the septic 3 times)? We have tried to keep it up- we have seen this coming for the last year or so. I see no end and no advantage to killing ourselves just so we can “own” a home? We have to start over at our age! The bank has gotten a lot of money off us and they will end up with the house my husband grew up in- I am a Catholic Christian and if it is immoral for us to leave this house so that we can survive, then God, forgive us!

  • Nana

    We are in this situation right now- in our 50s after living in our house 15 years- we refied to pay off some debt (student loans for my daughter, credit cards) when we still had equity in the home about 2 1/2 years ago, with the plan of refying later to get a better rate and ultimately selling the home for retirement. Well, that plan is out the window- we can’t even sell for what we got the house for 15 years ago. Now, we are supposed to stay in a home that is eating us alive not only with huge mortgage and insurance payments, but with upkeep (we have put in new windows, A/C, roof, painted twice and done the septic 3 times)? We have tried to keep it up- we have seen this coming for the last year or so. I see no end and no advantage to killing ourselves just so we can “own” a home? We have to start over at our age! The bank has gotten a lot of money off us and they will end up with the house my husband grew up in- I am a Catholic Christian and if it is immoral for us to leave this house so that we can survive, then God, forgive us!

  • http://www.joshcrews.com Josh Crews

    What is the Christian response to this situation:

    1. A small business owner finds an investment partner who goes 50/50 with him to build a factory (and pay workers), the sales collapse, the factory is unprofitable, and the business is bust. The factory is sold at a bargain price. The investor most of his investment. Has the business owner sinned?

    2. Same situation, except a bank funds the factory and takes 9% interest on the money and no ownership.

    3. Same scenario, except its a bank on a house in Miami.

  • http://www.joshcrews.com Josh Crews

    What is the Christian response to this situation:

    1. A small business owner finds an investment partner who goes 50/50 with him to build a factory (and pay workers), the sales collapse, the factory is unprofitable, and the business is bust. The factory is sold at a bargain price. The investor most of his investment. Has the business owner sinned?

    2. Same situation, except a bank funds the factory and takes 9% interest on the money and no ownership.

    3. Same scenario, except its a bank on a house in Miami.

  • DonS

    The morality issue aside for a moment, what one wishes the banks would realize out of this is that home loans with little or no down payment, together with interest only payments, are a very bad idea. Returning to a traditional model of a 20% down payment, with traditional amortized loans, would have eliminated much of this problem, and would also serve to dampen housing inflation.

    At bottom, a home loan is a contract, with liquidated damages in the form of collateral, which is the home. There is always a moral question when you do not fulfill your obligations under a contract, but defaulting is not always wrong, whether it be a mortgage or any other agreement. I believe Winston and Joe are right to analogize this situation to that of bankruptcy — they are morally equivalent. If one chooses to walk away from his mortgage merely because he is underwater and does not wish to absorb the loss, then I have a serious moral problem with that. But, if there is genuine financial sacrifice in remaining in the home and attempting to fulfill the mortgage obligation, then I can see situations where defaulting would be a morally acceptable choice. Of course, as in any other life situation, a Christian needs to be prepared to accept the full consequences of his actions, both temporal and eternal.

    As Joe mentioned above, before you decide to default on a mortgage, make sure you are in a “sole recourse” jurisdiction, where the lender is not permitted to pursue your assets, other than the collateral, to satisfy your loan obligation. Also, be fully prepared to take a severe hit to your credit rating for at least seven years, and understand that future potential employers, landlords, and the like often review your credit histories in the course of reviewing your application.

  • DonS

    The morality issue aside for a moment, what one wishes the banks would realize out of this is that home loans with little or no down payment, together with interest only payments, are a very bad idea. Returning to a traditional model of a 20% down payment, with traditional amortized loans, would have eliminated much of this problem, and would also serve to dampen housing inflation.

    At bottom, a home loan is a contract, with liquidated damages in the form of collateral, which is the home. There is always a moral question when you do not fulfill your obligations under a contract, but defaulting is not always wrong, whether it be a mortgage or any other agreement. I believe Winston and Joe are right to analogize this situation to that of bankruptcy — they are morally equivalent. If one chooses to walk away from his mortgage merely because he is underwater and does not wish to absorb the loss, then I have a serious moral problem with that. But, if there is genuine financial sacrifice in remaining in the home and attempting to fulfill the mortgage obligation, then I can see situations where defaulting would be a morally acceptable choice. Of course, as in any other life situation, a Christian needs to be prepared to accept the full consequences of his actions, both temporal and eternal.

    As Joe mentioned above, before you decide to default on a mortgage, make sure you are in a “sole recourse” jurisdiction, where the lender is not permitted to pursue your assets, other than the collateral, to satisfy your loan obligation. Also, be fully prepared to take a severe hit to your credit rating for at least seven years, and understand that future potential employers, landlords, and the like often review your credit histories in the course of reviewing your application.

  • ptl

    Have always thought it is a bit disingenuous to just blame the economic woes on the poor people who got the less than desirable mortages. The real culprit are the folks on Wall Street who knowingly “securitized” those bad loans and then them and others who allowed them to leverage this “bad” money at too much too high of ratios. Also might as well include the good folks at insurance companies who “protected” the investments with the credit default swaps and all the derivative activity that depended on the solvency of the original securities. Those that allowed that house of cards to be built and then sought their good ole boy protection when it all came crashing down are the real villains. In my mind, the poor folks with these loans are the scape goats of the investors and those on Capital Hill.

  • ptl

    Have always thought it is a bit disingenuous to just blame the economic woes on the poor people who got the less than desirable mortages. The real culprit are the folks on Wall Street who knowingly “securitized” those bad loans and then them and others who allowed them to leverage this “bad” money at too much too high of ratios. Also might as well include the good folks at insurance companies who “protected” the investments with the credit default swaps and all the derivative activity that depended on the solvency of the original securities. Those that allowed that house of cards to be built and then sought their good ole boy protection when it all came crashing down are the real villains. In my mind, the poor folks with these loans are the scape goats of the investors and those on Capital Hill.

  • Laura Short

    Maybe we need to reinstitute the Year of Jubilee in order to truly make the economy work in a moral way?

    Back in the early 1990′s, we returned from an overseas assignment with the military. Unbeknownst to us, the AF base we were stationed at was on the “hit-list”. Six weeks after arriving in town, we bought a lovely house in an area with really good schools. The Housing Office neglected to inform us about any impending possible closure (as required)…as did all the realtors, title companies, mortgage companies…you get the picture.

    The base closed. Gulf War I started and my late Husband was deployed. Our house lost about 30% of its value…as did everyone else’s. After the Gulf War, my Husband decided to leave the Air Force and seek civilian employment. He was successful, finding a job with a very well-known cargo carrier in the MidWest. Time to move.

    Eventually, after 16 months on the market, our house sold at considerably less than what we had paid for it; but since we had a VA loan, they covered the difference. All was forgiven. No questions asked…

    Except we felt morally responsible to pay our obligations.

    Airline pilots work long and hard years before they make the kind of money most folk think they do. It took us almost 8 years to repay the VA the $30,000 we “owed” them. Then we bought our next house. God blessed us then and continued to do so.

    My Husband died 5 years ago and I am in a house that is paid for…though it has lost a chunk of it’s original value. Oh well. It’s only money. I know God is faithful and will care for me…and that’s really all that matters.

  • Laura Short

    Maybe we need to reinstitute the Year of Jubilee in order to truly make the economy work in a moral way?

    Back in the early 1990′s, we returned from an overseas assignment with the military. Unbeknownst to us, the AF base we were stationed at was on the “hit-list”. Six weeks after arriving in town, we bought a lovely house in an area with really good schools. The Housing Office neglected to inform us about any impending possible closure (as required)…as did all the realtors, title companies, mortgage companies…you get the picture.

    The base closed. Gulf War I started and my late Husband was deployed. Our house lost about 30% of its value…as did everyone else’s. After the Gulf War, my Husband decided to leave the Air Force and seek civilian employment. He was successful, finding a job with a very well-known cargo carrier in the MidWest. Time to move.

    Eventually, after 16 months on the market, our house sold at considerably less than what we had paid for it; but since we had a VA loan, they covered the difference. All was forgiven. No questions asked…

    Except we felt morally responsible to pay our obligations.

    Airline pilots work long and hard years before they make the kind of money most folk think they do. It took us almost 8 years to repay the VA the $30,000 we “owed” them. Then we bought our next house. God blessed us then and continued to do so.

    My Husband died 5 years ago and I am in a house that is paid for…though it has lost a chunk of it’s original value. Oh well. It’s only money. I know God is faithful and will care for me…and that’s really all that matters.

  • Lance O’Donnell

    I am curious if any of you read Richard Florida’s March 2009 “How the Crash Will Reshape America” in The Atlantic. He argues for “the removal of homeownership from its long-privileged place at the center of the U.S. economy.” Here is one paragraph:

    “The housing bubble was the ultimate expression, and perhaps the last gasp, of an economic system some 80 years in the making, and now well past its “sell-by” date. The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, postindustrial economy. And not least, it created a workforce too often stuck in place, anchored by houses that cannot be profitably sold, at a time when flexibility and mobility are of great importance.” (http://www.theatlantic.com/magazine/archive/2009/03/how-the-crash-will-reshape-america/7293/6/)

    I am curious, especially to hear Dr. Veith’s thoughts, if possible.

  • Lance O’Donnell

    I am curious if any of you read Richard Florida’s March 2009 “How the Crash Will Reshape America” in The Atlantic. He argues for “the removal of homeownership from its long-privileged place at the center of the U.S. economy.” Here is one paragraph:

    “The housing bubble was the ultimate expression, and perhaps the last gasp, of an economic system some 80 years in the making, and now well past its “sell-by” date. The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, postindustrial economy. And not least, it created a workforce too often stuck in place, anchored by houses that cannot be profitably sold, at a time when flexibility and mobility are of great importance.” (http://www.theatlantic.com/magazine/archive/2009/03/how-the-crash-will-reshape-america/7293/6/)

    I am curious, especially to hear Dr. Veith’s thoughts, if possible.

  • Peter Leavitt

    Laura provides the perfect example of how, a moral and responsible couple dealt with a mortgage problem. When people sign a mortgage contract, they have a serious moral obligation to meet the terms of that contract, unless they honestly cannot meet the obligation in which case a filing for bankruptcy is appropriate.

    People, also, have a prudential obligation to, with the help of their own, not the bank’s, lawyer, to carefully examine the terms of a mortgage contract and, if necessary, either negotiate a better one, or opt out of it. A mortgage for most people is the largest contract they will deal with and needs to be taken very seriously.

  • Peter Leavitt

    Laura provides the perfect example of how, a moral and responsible couple dealt with a mortgage problem. When people sign a mortgage contract, they have a serious moral obligation to meet the terms of that contract, unless they honestly cannot meet the obligation in which case a filing for bankruptcy is appropriate.

    People, also, have a prudential obligation to, with the help of their own, not the bank’s, lawyer, to carefully examine the terms of a mortgage contract and, if necessary, either negotiate a better one, or opt out of it. A mortgage for most people is the largest contract they will deal with and needs to be taken very seriously.

  • JSH

    To choose not to repay debt when you are able to do so is immoral pure and simple. As for the bankruptcy question, I would file bankruptcy if it was the only way out of my problems. HOWEVER, I would feel a moral obligation (although no longer a legal one) to repay the debt when I was back on my feet and could do so and I would do so.

  • JSH

    To choose not to repay debt when you are able to do so is immoral pure and simple. As for the bankruptcy question, I would file bankruptcy if it was the only way out of my problems. HOWEVER, I would feel a moral obligation (although no longer a legal one) to repay the debt when I was back on my feet and could do so and I would do so.

  • http://mesamike.org Mike Westfall

    If the terms of the mortgage contract include giving the house back in lieu of paying it off, then I would think that giving the house back in lieu of paying it off could not be considered a violation of the terms of the contract. A true violation of a contract would probably land you in court, or at least the threat of it.

  • http://mesamike.org Mike Westfall

    If the terms of the mortgage contract include giving the house back in lieu of paying it off, then I would think that giving the house back in lieu of paying it off could not be considered a violation of the terms of the contract. A true violation of a contract would probably land you in court, or at least the threat of it.

  • http://humblemusings.com Amy Scott

    To choose not to repay debt when you are able to do so is immoral pure and simple.

    True. Nobody is arguing otherwise. What we are arguing is that giving back the keys (and complying with the recourse laws in your state) is legal satisfaction for the debt, morally and legally, regardless of your ability to pay.

  • http://humblemusings.com Amy Scott

    To choose not to repay debt when you are able to do so is immoral pure and simple.

    True. Nobody is arguing otherwise. What we are arguing is that giving back the keys (and complying with the recourse laws in your state) is legal satisfaction for the debt, morally and legally, regardless of your ability to pay.

  • ptl

    It sure would be nice to see the same moral outrage against the group of people who perpetrated and profited and got protection from the consequences of the entire economic collapse as we see against those people at the bottom of the barrel who were sold a pack of lies. Should not the peddlars of the big lie bear the bulk of the responsibility for the collapse? My guess is not, and the abuse of the poor suckers at the lower end continue, since they really have no powerful way to defend themselves.

  • ptl

    It sure would be nice to see the same moral outrage against the group of people who perpetrated and profited and got protection from the consequences of the entire economic collapse as we see against those people at the bottom of the barrel who were sold a pack of lies. Should not the peddlars of the big lie bear the bulk of the responsibility for the collapse? My guess is not, and the abuse of the poor suckers at the lower end continue, since they really have no powerful way to defend themselves.

  • WebMonk

    JSH – quite right, but in some/many cases involving mortgages giving back the home is indeed repaying the debt. In those situations, to be doing the imm0ral non-payment you mention, the person would have to stop making payments and then have to insist on staying in the home anyway. In most cases this is not what happens – the person stops making payments and the house is then the loaner’s.

    I don’t have statistics to back me up, but in all the cases of which I am aware (including my own), it is specifically spelled out in the finance agreement – if you stop making payments then the house belongs to the lender and that’s “fine”. (obviously there are consequences such as credit ratings and things, but morally and legally that’s a perfectly fine way to go)

  • WebMonk

    JSH – quite right, but in some/many cases involving mortgages giving back the home is indeed repaying the debt. In those situations, to be doing the imm0ral non-payment you mention, the person would have to stop making payments and then have to insist on staying in the home anyway. In most cases this is not what happens – the person stops making payments and the house is then the loaner’s.

    I don’t have statistics to back me up, but in all the cases of which I am aware (including my own), it is specifically spelled out in the finance agreement – if you stop making payments then the house belongs to the lender and that’s “fine”. (obviously there are consequences such as credit ratings and things, but morally and legally that’s a perfectly fine way to go)

  • http://humblemusings.com Amy Scott

    ptl,

    It’s always been about the oligarchs vs. the peasants, but they make us distract ourselves with Democrat vs. Republican arguments while they rape and pillage the people. The housing bubble was created by the Fed and XYZ-PQwhat? swaps from the good boys at Government Sachs and Company. They are responsible.

    As a Christian, though, I still think the point of the post is relevant, as “we” now have to decide how to function in the middle of this corruption. I’ve already made the point above that my conscience would be clear on a strategic default. If/when everyone does it, it will NOT be the reason for the fallout. Google: Fed, too much debt, Goldman Sachs, and why we’re really sunk.

  • http://humblemusings.com Amy Scott

    ptl,

    It’s always been about the oligarchs vs. the peasants, but they make us distract ourselves with Democrat vs. Republican arguments while they rape and pillage the people. The housing bubble was created by the Fed and XYZ-PQwhat? swaps from the good boys at Government Sachs and Company. They are responsible.

    As a Christian, though, I still think the point of the post is relevant, as “we” now have to decide how to function in the middle of this corruption. I’ve already made the point above that my conscience would be clear on a strategic default. If/when everyone does it, it will NOT be the reason for the fallout. Google: Fed, too much debt, Goldman Sachs, and why we’re really sunk.

  • Winston Smith

    Homeownership is probably over-rated.

    For one thing, you do not really “own” your home as long as you owe property taxes to the local government. If they can throw your stuff on the street after you miss a few payments, you are, practically speaking, renting from your city or county, even if you own your home free and clear.

    Secondly, we Christians are aliens and strangers in the Earth, just passing through. Our real home is in Heaven, where property values never decline.

  • Winston Smith

    Homeownership is probably over-rated.

    For one thing, you do not really “own” your home as long as you owe property taxes to the local government. If they can throw your stuff on the street after you miss a few payments, you are, practically speaking, renting from your city or county, even if you own your home free and clear.

    Secondly, we Christians are aliens and strangers in the Earth, just passing through. Our real home is in Heaven, where property values never decline.

  • WebMonk

    Sorry, “loaner’s” should be “lender’s” above. I went back and reworded the sentence without paying attention.

  • WebMonk

    Sorry, “loaner’s” should be “lender’s” above. I went back and reworded the sentence without paying attention.

  • WebMonk

    Winston – overrated, at times. bad idea? No.

    Yes, you have to pay taxes, but if you own your home and pay $5000 in taxes each year, you’re paying $5000 of “rent” to the government each year. However, that’s a heck of a lot cheaper than paying traditional rent of $20-30,000 per year.

    Good stewardship of resources suggests home ownership if that is all that is in the way. There is interest, insurance, tax breaks, maintenance, etc, etc, etc that complicate the picture to the point that the general statement that everyone ought to try to own a home is out and out stupid.

    But, when circumstances are right, then it is a wise move to purchase a home. (and such circumstances are not rare)

  • WebMonk

    Winston – overrated, at times. bad idea? No.

    Yes, you have to pay taxes, but if you own your home and pay $5000 in taxes each year, you’re paying $5000 of “rent” to the government each year. However, that’s a heck of a lot cheaper than paying traditional rent of $20-30,000 per year.

    Good stewardship of resources suggests home ownership if that is all that is in the way. There is interest, insurance, tax breaks, maintenance, etc, etc, etc that complicate the picture to the point that the general statement that everyone ought to try to own a home is out and out stupid.

    But, when circumstances are right, then it is a wise move to purchase a home. (and such circumstances are not rare)

  • Peter Leavitt

    ptl, It sure would be nice to see the same moral outrage against the group of people who perpetrated and profited and got protection from the consequences of the entire economic collapse… [et al].

    This, however moving the rich sentiment, is beside the point and hardly provides anyone an excuse for selfishly abrogating a contract.

    The main causes of the economic collapse were a combination of Fed easy money, government pressure on banks to relax traditional mortgage loan standards, mismanagement of bank leverage risk, and individuals who took on unreasonable mortgage risk.

    Your view that the “poor suckers” got screwed belies the point that many of them naively took on more mortgage risk than was reasonable. In fact, there is, as usual, a surfeit of fervent outrage against the evil bankers, however, complex the real problem is.

  • Peter Leavitt

    ptl, It sure would be nice to see the same moral outrage against the group of people who perpetrated and profited and got protection from the consequences of the entire economic collapse… [et al].

    This, however moving the rich sentiment, is beside the point and hardly provides anyone an excuse for selfishly abrogating a contract.

    The main causes of the economic collapse were a combination of Fed easy money, government pressure on banks to relax traditional mortgage loan standards, mismanagement of bank leverage risk, and individuals who took on unreasonable mortgage risk.

    Your view that the “poor suckers” got screwed belies the point that many of them naively took on more mortgage risk than was reasonable. In fact, there is, as usual, a surfeit of fervent outrage against the evil bankers, however, complex the real problem is.

  • Reg Schofield

    Just walking away should be the last option and then it should be done in accordance to the law of the land. Too many people look at homes as investments and not homes . In the area I live developers have pretty much ruined any chance of my wife and I of owning a home. They have caused a home that would have sold for 80 000 to the new asking price of 130 000 and above . Its crazy!
    Then you have has lending institutions that gave away mortgages like candy to people who could not afford the mortgage they took on . Before my Grandfather passed away over 20 years ago he told me , even though he lived through the wars and depression , he would rather live then and raise a family then try in today’s world of uncontrolled greed .

  • Reg Schofield

    Just walking away should be the last option and then it should be done in accordance to the law of the land. Too many people look at homes as investments and not homes . In the area I live developers have pretty much ruined any chance of my wife and I of owning a home. They have caused a home that would have sold for 80 000 to the new asking price of 130 000 and above . Its crazy!
    Then you have has lending institutions that gave away mortgages like candy to people who could not afford the mortgage they took on . Before my Grandfather passed away over 20 years ago he told me , even though he lived through the wars and depression , he would rather live then and raise a family then try in today’s world of uncontrolled greed .

  • cattail

    As a sort of side note, two days before the bank that held my mortgage (Washington Mutual) was taken over by the Federal Government, I received the last of a continuing series of weekly advertising letters from the bank offering me a large, no-down-payment, variable interest home equity loan. I’m sure that such policies of the banks had a great deal to do with the price bubble and subsequent bust! I wish I’d kept it–unfortunately the next day (Wednesday) was garbage day and the letter went off with the recycling. As I realized when I saw the news Thursday morning, that letter certainly would have been a telling historical document!

    I do believe that the banks are responsible for a lot of the economic mess we’re in. There’s no way they should have been making those questionable loans, and they should have disclosed fully the eventual effects on the monthly payments when the interest rate “varied” (i.e. went up). I’m just thankful that my loan (a standard mortgage at a fixed interest rate) now has only 4 1/2 years to run. Of course I never would have been suckered into one of those no-money-down-variable-rate mortgages, but I have a BS degree in accounting and am a CPA, so I have far, far more knowledge in that area than do most people.

    It’s all very well to say it’s unethical to turn the house back to the bank, and it probably is for those who can afford the payments–they gambled and lost–even if technically legal under their mortgage contracts. But what about those many people who have lost their jobs and have no prospects of decent employment in the near or even far future?

  • cattail

    As a sort of side note, two days before the bank that held my mortgage (Washington Mutual) was taken over by the Federal Government, I received the last of a continuing series of weekly advertising letters from the bank offering me a large, no-down-payment, variable interest home equity loan. I’m sure that such policies of the banks had a great deal to do with the price bubble and subsequent bust! I wish I’d kept it–unfortunately the next day (Wednesday) was garbage day and the letter went off with the recycling. As I realized when I saw the news Thursday morning, that letter certainly would have been a telling historical document!

    I do believe that the banks are responsible for a lot of the economic mess we’re in. There’s no way they should have been making those questionable loans, and they should have disclosed fully the eventual effects on the monthly payments when the interest rate “varied” (i.e. went up). I’m just thankful that my loan (a standard mortgage at a fixed interest rate) now has only 4 1/2 years to run. Of course I never would have been suckered into one of those no-money-down-variable-rate mortgages, but I have a BS degree in accounting and am a CPA, so I have far, far more knowledge in that area than do most people.

    It’s all very well to say it’s unethical to turn the house back to the bank, and it probably is for those who can afford the payments–they gambled and lost–even if technically legal under their mortgage contracts. But what about those many people who have lost their jobs and have no prospects of decent employment in the near or even far future?

  • ptl

    Just as you say above Peter….

    “The main causes of the economic collapse were a combination of Fed easy money, government pressure on banks to relax traditional mortgage loan standards, mismanagement of bank leverage risk, and individuals who took on unreasonable mortgage risk.”

    and who are taking a much bigger beating relative to their ability to pay? The poor slobs at the bottom of that food chain! And who do the elites mentioned above continue to blame for all of this? Well, not themselves, but all those fools who took those bad mortages. How sad that anyone except them and their crony friends buy that crap!

    Nothing wrong with bankers or our system, but it can be corrupted and was, not by the little people but by the big dogs, yet it will be the little people that have hell to pay….so say the big dogs.

  • ptl

    Just as you say above Peter….

    “The main causes of the economic collapse were a combination of Fed easy money, government pressure on banks to relax traditional mortgage loan standards, mismanagement of bank leverage risk, and individuals who took on unreasonable mortgage risk.”

    and who are taking a much bigger beating relative to their ability to pay? The poor slobs at the bottom of that food chain! And who do the elites mentioned above continue to blame for all of this? Well, not themselves, but all those fools who took those bad mortages. How sad that anyone except them and their crony friends buy that crap!

    Nothing wrong with bankers or our system, but it can be corrupted and was, not by the little people but by the big dogs, yet it will be the little people that have hell to pay….so say the big dogs.

  • http://www.geneveith.com Gene Veith

    Thanks, Amy, et al., for pointing out that giving up the property in lieu of payment DOES fulfill the contract. (Is that right, lawyers?)

  • http://www.geneveith.com Gene Veith

    Thanks, Amy, et al., for pointing out that giving up the property in lieu of payment DOES fulfill the contract. (Is that right, lawyers?)

  • Patrick Kyle

    Also note that some banks take out insurance against your default(that you often pay for) so when you default the bank gets whatever you paid in down payment , loan fees, and mortgage payments, plus the house, plus whatever the insurance may pay… It is not hard to see why the banks are dragging their feet on loan modifications. You would think that if they were really losing their shorts they would be a lot more amenable to modifications.

    Go try to get a modification and let us all know how that goes.

  • Patrick Kyle

    Also note that some banks take out insurance against your default(that you often pay for) so when you default the bank gets whatever you paid in down payment , loan fees, and mortgage payments, plus the house, plus whatever the insurance may pay… It is not hard to see why the banks are dragging their feet on loan modifications. You would think that if they were really losing their shorts they would be a lot more amenable to modifications.

    Go try to get a modification and let us all know how that goes.

  • DonS

    Dr. Veith @ 38: No, it’s not accurate to say that giving up the property (collateral) in lieu of making the required payments fulfills the contract. The duty of the borrower under the mortgage contract is to make the required payments. If those payments are not made within a specified period of time, the borrower is said to have defaulted on, or breached, the mortgage agreement. In order to minimize its financial losses, the lender is entitled to take full possession of the collateral, but this is more like the execution of a liquidated damages (pre-negotiated damages) provision than it is the fulfillment of the agreement. There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    It is sometimes possible to avoid technical default by negotiating a short sale or other arrangement with the lender, involving an expedited return of the collateral to the lender.

  • DonS

    Dr. Veith @ 38: No, it’s not accurate to say that giving up the property (collateral) in lieu of making the required payments fulfills the contract. The duty of the borrower under the mortgage contract is to make the required payments. If those payments are not made within a specified period of time, the borrower is said to have defaulted on, or breached, the mortgage agreement. In order to minimize its financial losses, the lender is entitled to take full possession of the collateral, but this is more like the execution of a liquidated damages (pre-negotiated damages) provision than it is the fulfillment of the agreement. There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    It is sometimes possible to avoid technical default by negotiating a short sale or other arrangement with the lender, involving an expedited return of the collateral to the lender.

  • Joe

    Thanks, Amy, et al., for pointing out that giving up the property in lieu of payment DOES fulfill the contract. (Is that right, lawyers?)

    First it will depend on the contract and the law of your state. In Wisconsin (or many other states), you are still on the hook for the deficiency (ie the difference between what the bank can sell the house for and the balance due and oweing at the time you turned the house over). I have never see a bank contract away this right to a deficiency when making a loan.

  • Joe

    Thanks, Amy, et al., for pointing out that giving up the property in lieu of payment DOES fulfill the contract. (Is that right, lawyers?)

    First it will depend on the contract and the law of your state. In Wisconsin (or many other states), you are still on the hook for the deficiency (ie the difference between what the bank can sell the house for and the balance due and oweing at the time you turned the house over). I have never see a bank contract away this right to a deficiency when making a loan.

  • Purple Kooaid

    Cattail says: I do believe that the banks are responsible for a lot of the economic mess we’re in. There’s no way they should have been making those questionable loans, and they should have disclosed fully the eventual effects on the monthly payments when the interest rate “varied” (i.e. went up). I’m just thankful that my loan (a standard mortgage at a fixed interest rate) now has only 4 1/2 years to run. Of course I never would have been suckered into one of those no-money-down-variable-rate mortgages, but I have a BS degree in accounting and am a CPA, so I have far, far more knowledge in that area than do most people. ”

    ME: Puhlease! Should we require math tests before you sign a loan? This is ridiculous. I had no degree, and my husband had no degree (and I never even took a math class past pre-cal) when we signed our first note. Everything was spelled out. I don’t like big risks so never took a variable loan. If we had questions, it is our responsibility to find someone in our church or family to help us. How hard is it it to wait until you understand something to sign it?

    Americans like to buy now and pay later. We always have. Remember the song, “I owe my soul to the company store?” Our debt load has always been more than we earn. Sad, but true.

    The government forced banks to relax their loan standards…this is the fault of the govt, but still, if you take out a loan, you are responsible for it.

    And by the way, things have not changed much. People are still qualifying for loans w/out much down payment and banks are loaning them the money.

  • Purple Kooaid

    Cattail says: I do believe that the banks are responsible for a lot of the economic mess we’re in. There’s no way they should have been making those questionable loans, and they should have disclosed fully the eventual effects on the monthly payments when the interest rate “varied” (i.e. went up). I’m just thankful that my loan (a standard mortgage at a fixed interest rate) now has only 4 1/2 years to run. Of course I never would have been suckered into one of those no-money-down-variable-rate mortgages, but I have a BS degree in accounting and am a CPA, so I have far, far more knowledge in that area than do most people. ”

    ME: Puhlease! Should we require math tests before you sign a loan? This is ridiculous. I had no degree, and my husband had no degree (and I never even took a math class past pre-cal) when we signed our first note. Everything was spelled out. I don’t like big risks so never took a variable loan. If we had questions, it is our responsibility to find someone in our church or family to help us. How hard is it it to wait until you understand something to sign it?

    Americans like to buy now and pay later. We always have. Remember the song, “I owe my soul to the company store?” Our debt load has always been more than we earn. Sad, but true.

    The government forced banks to relax their loan standards…this is the fault of the govt, but still, if you take out a loan, you are responsible for it.

    And by the way, things have not changed much. People are still qualifying for loans w/out much down payment and banks are loaning them the money.

  • erik g

    There’s nothing that gets people talking faster that a post about the morality of money decisions, is there! 42 comments and counting. Only the post on church growth/15 minute masses comes close.

  • erik g

    There’s nothing that gets people talking faster that a post about the morality of money decisions, is there! 42 comments and counting. Only the post on church growth/15 minute masses comes close.

  • Peter Leavitt

    Kevin Hasset in an AEI article, Mortgage Morality, writes that widespread mortgage defaults could lead into a deeper depression, though most Americans with underwater mortgages continue to keep up with payments. He concludes the article with:

    If that argument holds sway–if knavery carries the day and the economic variables change enough to make default desirable–then all hell may yet break loose.

    Perhaps our best hope is to be found in the observation that most Americans still find something morally repugnant in strategic defaults, and in the evidence that our collective willingness to set aside our moral convictions may be held in check if enough people remember the Ten Commandments at the right moment and think: Thou shalt make thy mortgage payment.

  • Peter Leavitt

    Kevin Hasset in an AEI article, Mortgage Morality, writes that widespread mortgage defaults could lead into a deeper depression, though most Americans with underwater mortgages continue to keep up with payments. He concludes the article with:

    If that argument holds sway–if knavery carries the day and the economic variables change enough to make default desirable–then all hell may yet break loose.

    Perhaps our best hope is to be found in the observation that most Americans still find something morally repugnant in strategic defaults, and in the evidence that our collective willingness to set aside our moral convictions may be held in check if enough people remember the Ten Commandments at the right moment and think: Thou shalt make thy mortgage payment.

  • http://mesamike.org Mike Westfall

    …enough people remember the Ten Commandments at the right moment and think: .

    But not because most people fear, love and trust in God above all things and want to do His will. More likely they fear the unstated consequences of disobeying that “commandment,” which in it’s fullness reads, Thou shalt make thy mortgage payment, lest thy CREDIT RATING suffer.

    The Credit Rating is what most mortgage owners fear love and trust.

  • http://mesamike.org Mike Westfall

    …enough people remember the Ten Commandments at the right moment and think: .

    But not because most people fear, love and trust in God above all things and want to do His will. More likely they fear the unstated consequences of disobeying that “commandment,” which in it’s fullness reads, Thou shalt make thy mortgage payment, lest thy CREDIT RATING suffer.

    The Credit Rating is what most mortgage owners fear love and trust.

  • ptl

    Please get real….if Americans are willing to suffer the moral and ethical consequences of walking away from marriages at a 50% rate, as well as a full time share in the rearing of any children from that union, it might not be as tough a decision to walk away from an underwater mortgage as some people may think. Me thinks that is what the mistaken financial institutions were counting (no pun intended) on when they concocted this corrupt scheme, that is, “we play by the rules, but that’s easy because we make ‘em in our favor, of course, and so will the little guys, cuz that’s what we tell ‘em and we can back it up with the force of the law” and it may be true, until the little guy comes to believe that the rules were stacked against them and the guys at the top got away and left them holding the bag.

  • ptl

    Please get real….if Americans are willing to suffer the moral and ethical consequences of walking away from marriages at a 50% rate, as well as a full time share in the rearing of any children from that union, it might not be as tough a decision to walk away from an underwater mortgage as some people may think. Me thinks that is what the mistaken financial institutions were counting (no pun intended) on when they concocted this corrupt scheme, that is, “we play by the rules, but that’s easy because we make ‘em in our favor, of course, and so will the little guys, cuz that’s what we tell ‘em and we can back it up with the force of the law” and it may be true, until the little guy comes to believe that the rules were stacked against them and the guys at the top got away and left them holding the bag.

  • http://humblemusings.com Amy Scott

    There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    If giving back the house only legally satisfies the debt but not morally (as some are arguing here), then does it follow that it is sin for any Christian to ever enter into a mortgage agreement? Hear me out.

    You are presuming upon the future, thinking that you will be able to make ~thousand dollar payments for 30 years. Since nobody can know what tomorrow will bring, it would be sin, or at least the height of foolishness, to obligate one’s word for 30 years without foreknowledge of one’s job security. How do you know what tomorrow will bring? What if you lose your earning ability and can never repay?

    Is entering into these agreements an explicit violation of the command to always preface your plans with, “If the Lord wills” assuming “if the Lord wills” is not in anyone’s mortgage papers? That’s why it seems to me that has to be one of the two: it is either moral for the Christian to satisfy his obligation with turning in the keys and satisfying any recourse obligation or it is sinful for him to ever enter into the agreement in the first place. To say that the Christian is morally obligated for the full loan amount in cash —then no Christian should ever enter into a mortgage agreement (unless he has the gift of prophecy and can know for sure that he will meet his obligation at some point in his lifetime).

    An aside, is paying PMI also further moral satisfaction of the agreement?

    One thing we can all agree on, I think (!), is that there is not one positive thing about debt mentioned in the Bible and Christians ought to avoid it, making it the exceptive circumstance and not the norm that it is.

  • http://humblemusings.com Amy Scott

    There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    If giving back the house only legally satisfies the debt but not morally (as some are arguing here), then does it follow that it is sin for any Christian to ever enter into a mortgage agreement? Hear me out.

    You are presuming upon the future, thinking that you will be able to make ~thousand dollar payments for 30 years. Since nobody can know what tomorrow will bring, it would be sin, or at least the height of foolishness, to obligate one’s word for 30 years without foreknowledge of one’s job security. How do you know what tomorrow will bring? What if you lose your earning ability and can never repay?

    Is entering into these agreements an explicit violation of the command to always preface your plans with, “If the Lord wills” assuming “if the Lord wills” is not in anyone’s mortgage papers? That’s why it seems to me that has to be one of the two: it is either moral for the Christian to satisfy his obligation with turning in the keys and satisfying any recourse obligation or it is sinful for him to ever enter into the agreement in the first place. To say that the Christian is morally obligated for the full loan amount in cash —then no Christian should ever enter into a mortgage agreement (unless he has the gift of prophecy and can know for sure that he will meet his obligation at some point in his lifetime).

    An aside, is paying PMI also further moral satisfaction of the agreement?

    One thing we can all agree on, I think (!), is that there is not one positive thing about debt mentioned in the Bible and Christians ought to avoid it, making it the exceptive circumstance and not the norm that it is.

  • Peter Leavitt

    Along with the legal and moral aspect, there is the matter of honor.
    Without much thinking about this, most people know deep down that it would be dishonorable to decide on a strategic default for merely crass economic reasons.

    Honor is not much spoken of lately, though anyone who honors God, country, and duty would not be involved in a strategic mortgage default. With men and women putting their lives on the line honorably fighting for their country, the rest of could sacrifice a few shekels with underwater mortgages, most of which in the long will break far above water.

  • Peter Leavitt

    Along with the legal and moral aspect, there is the matter of honor.
    Without much thinking about this, most people know deep down that it would be dishonorable to decide on a strategic default for merely crass economic reasons.

    Honor is not much spoken of lately, though anyone who honors God, country, and duty would not be involved in a strategic mortgage default. With men and women putting their lives on the line honorably fighting for their country, the rest of could sacrifice a few shekels with underwater mortgages, most of which in the long will break far above water.

  • DonS

    Amy @ 47: Since you quoted a portion of my post 40, I will assume you directed your comment at least partially to me.

    Please review my post 20. You will see that I am somewhat equivocal on this issue. In my post 40 I was addressing Dr. Veith’s legal question — legally when you fail to make your mortgage payments you have defaulted on your obligation. Turning in the keys, via foreclosure, is the consequence of that default. In many (but not all) states, that satisfies your liability to the lender, but it is still a legal default. It is not a legal satisfaction of your obligations under the mortgage. However, your question is addressed to the morality of such a default, and whether Christians can even enter into such agreements, given that we are not to presume upon the Lord and His grant of life to us. My answer is yes, we can. When a bank gives a 30 year mortgage to a 70 year old person, they are not expecting that person to fulfill the obligations of the mortgage. They expect that either the person will sell the house at some point, and pay off the mortgage, or the person’s estate will do so. This is why loans are collateralized — so the lender can get back its investment if the borrower cannot or will not complete his/her obligation under the loan. Given the uncertainty of life, contracts are always undertaken with the idea that they are subject to unwritten conditions, such as continued good health, etc. Termination clauses are written in to predetermine how things will be wound up if one or both parties will not or cannot complete their obligations.

    In my view, strategic mortgage defaults are immoral for Christians. If you can afford to make the payments, you should make them because you said you would. Using the immorality of others, such as some lenders, to justify your own immorality, because you don’t want to assume the financial loss for the investment you chose to make, is an exercize of the worst kind of situational ethics. We are not held to man’s standards, but rather to God’s. However, if your circumstances change dramatically, and you cannot reasonably fulfill the mortgage obligation without jeopardizing your family’s economic health, then you should contact the lender and begin the process of unwinding the mortgage, in the most respectful and fair way possible for both sides.

  • DonS

    Amy @ 47: Since you quoted a portion of my post 40, I will assume you directed your comment at least partially to me.

    Please review my post 20. You will see that I am somewhat equivocal on this issue. In my post 40 I was addressing Dr. Veith’s legal question — legally when you fail to make your mortgage payments you have defaulted on your obligation. Turning in the keys, via foreclosure, is the consequence of that default. In many (but not all) states, that satisfies your liability to the lender, but it is still a legal default. It is not a legal satisfaction of your obligations under the mortgage. However, your question is addressed to the morality of such a default, and whether Christians can even enter into such agreements, given that we are not to presume upon the Lord and His grant of life to us. My answer is yes, we can. When a bank gives a 30 year mortgage to a 70 year old person, they are not expecting that person to fulfill the obligations of the mortgage. They expect that either the person will sell the house at some point, and pay off the mortgage, or the person’s estate will do so. This is why loans are collateralized — so the lender can get back its investment if the borrower cannot or will not complete his/her obligation under the loan. Given the uncertainty of life, contracts are always undertaken with the idea that they are subject to unwritten conditions, such as continued good health, etc. Termination clauses are written in to predetermine how things will be wound up if one or both parties will not or cannot complete their obligations.

    In my view, strategic mortgage defaults are immoral for Christians. If you can afford to make the payments, you should make them because you said you would. Using the immorality of others, such as some lenders, to justify your own immorality, because you don’t want to assume the financial loss for the investment you chose to make, is an exercize of the worst kind of situational ethics. We are not held to man’s standards, but rather to God’s. However, if your circumstances change dramatically, and you cannot reasonably fulfill the mortgage obligation without jeopardizing your family’s economic health, then you should contact the lender and begin the process of unwinding the mortgage, in the most respectful and fair way possible for both sides.

  • Joe

    Don – brings up a good point about the strategic defaults. Many folks who can afford the payments are choose to walk away becuase they are losing investiments and the houses are not their homes (i.e they were trying to flip it).

  • Joe

    Don – brings up a good point about the strategic defaults. Many folks who can afford the payments are choose to walk away becuase they are losing investiments and the houses are not their homes (i.e they were trying to flip it).

  • http://humblemusings.com Amy Scott

    Without much thinking about this, most people know deep down that it would be dishonorable to decide on a strategic default for merely  crass economic reasons.

    As an investor and homeowner, I view any contract with a bank exactly as the bank does– as an investment (albeit a poor one on the loanee’s side). The bank is not loaning money out of goodwill but because they are making an investment with the hope to gain but aware of the possibility of loss.

    I don’t get all the “emotion” logic here. Maybe as a trader, I am used to “cutting my losses” all the time and I don’t identify (and neither do the banks) with the goo-goo factor here.

    I’m thinking about this…. Interestingly, I would concede that a strategic default on a loan with a family member is different from a strategic default on a bank, as the family member + you enter into the agreement under certain moral pretenses in which the “goo-goo factor” would be in play. However, I do not understand how a person enters into this same sort of agreement with a bank under anything short of strictly legal pretenses.

    I think a more complete and compelling argument on your side would be that since defaults are generally considered immoral by onlookers and since Christians should avoid the appearance of immorality, therefore Christians shouldn’t purposely default.

    Then I would have to argue that these same heathens consider abortion moral, so what’s your point? But in the debate, I’d concede the point to be yours. And for this reason, it is why I’m considering the discussion.

    I don’t have debt, but as an active trader/ investor and serious Christian, it’s important to me to think Biblically about money.

    The Small Print:

    your question is addressed to the morality of such a default, and whether Christians can even enter into such agreements, given that we are not to presume upon the Lord and His grant of life to us.  My answer is yes, we can.

    On what basis?

    When a bank gives a 30 year mortgage to a 70 year old person, they are not expecting that person to fulfill the obligations of the mortgage.

    Exactly, and they ought not expect a person without a j-o-b could take on a $500,000 mortgage either, but that’s neither here nor there.

    They expect that either the person will sell the house at some point, and pay off the mortgage, or the person’s estate will do so.

    It seems like you’re making MY point….? (?!?!?) Why can’t a 40-year-old Christian do this?

    Oh wait. He can. He could all the way up until 2007 when housing prices dropped and suddenly the bank has to “eat it”. So it was moral pre-2007, but now that the bank has to take the consequences of its bad investment, it’s immoral.

    It seems to me that Christians ought not enter into such agreements if default isn’t a moral option.

    Using the immorality of others, such as some lenders, to justify your own immorality, because you don’t want to assume the financial loss for the investment you chose to make, is an exercize of the worst kind of situational ethics.

    Maybe you weren’t talking to me here (I never said that), as I agree that the Christian’s standard is the Bible, not the morality of others. The fact that the too-well-connected-to-fail banks are gorging on taxpayers is independent of our response.

    ——————-

    I appreciate the discussion here. I rarely/never debate on the internet, as I find it pointless, but I’m really thinking about this and appreciate the friendly tone.

  • http://humblemusings.com Amy Scott

    Without much thinking about this, most people know deep down that it would be dishonorable to decide on a strategic default for merely  crass economic reasons.

    As an investor and homeowner, I view any contract with a bank exactly as the bank does– as an investment (albeit a poor one on the loanee’s side). The bank is not loaning money out of goodwill but because they are making an investment with the hope to gain but aware of the possibility of loss.

    I don’t get all the “emotion” logic here. Maybe as a trader, I am used to “cutting my losses” all the time and I don’t identify (and neither do the banks) with the goo-goo factor here.

    I’m thinking about this…. Interestingly, I would concede that a strategic default on a loan with a family member is different from a strategic default on a bank, as the family member + you enter into the agreement under certain moral pretenses in which the “goo-goo factor” would be in play. However, I do not understand how a person enters into this same sort of agreement with a bank under anything short of strictly legal pretenses.

    I think a more complete and compelling argument on your side would be that since defaults are generally considered immoral by onlookers and since Christians should avoid the appearance of immorality, therefore Christians shouldn’t purposely default.

    Then I would have to argue that these same heathens consider abortion moral, so what’s your point? But in the debate, I’d concede the point to be yours. And for this reason, it is why I’m considering the discussion.

    I don’t have debt, but as an active trader/ investor and serious Christian, it’s important to me to think Biblically about money.

    The Small Print:

    your question is addressed to the morality of such a default, and whether Christians can even enter into such agreements, given that we are not to presume upon the Lord and His grant of life to us.  My answer is yes, we can.

    On what basis?

    When a bank gives a 30 year mortgage to a 70 year old person, they are not expecting that person to fulfill the obligations of the mortgage.

    Exactly, and they ought not expect a person without a j-o-b could take on a $500,000 mortgage either, but that’s neither here nor there.

    They expect that either the person will sell the house at some point, and pay off the mortgage, or the person’s estate will do so.

    It seems like you’re making MY point….? (?!?!?) Why can’t a 40-year-old Christian do this?

    Oh wait. He can. He could all the way up until 2007 when housing prices dropped and suddenly the bank has to “eat it”. So it was moral pre-2007, but now that the bank has to take the consequences of its bad investment, it’s immoral.

    It seems to me that Christians ought not enter into such agreements if default isn’t a moral option.

    Using the immorality of others, such as some lenders, to justify your own immorality, because you don’t want to assume the financial loss for the investment you chose to make, is an exercize of the worst kind of situational ethics.

    Maybe you weren’t talking to me here (I never said that), as I agree that the Christian’s standard is the Bible, not the morality of others. The fact that the too-well-connected-to-fail banks are gorging on taxpayers is independent of our response.

    ——————-

    I appreciate the discussion here. I rarely/never debate on the internet, as I find it pointless, but I’m really thinking about this and appreciate the friendly tone.

  • Peter Leavitt

    Amy, a stock or bond trade is quite distinct from a mortgage contract. I frequently trade stocks and bonds but wouldn’t think of abrogating a mortgage or any serious usiness contract.

    Most people who enter into long-term mortgage contracts manage to fulfill them and in the long run profit from their capital-value increase. Those who presently can make payments on underwater mortgage loans actually have a good chance of profiting from the long-term increase in their capital value and at the same time enjoy a favorable credit rating, to say nothing of a clear conscience.

  • Peter Leavitt

    Amy, a stock or bond trade is quite distinct from a mortgage contract. I frequently trade stocks and bonds but wouldn’t think of abrogating a mortgage or any serious usiness contract.

    Most people who enter into long-term mortgage contracts manage to fulfill them and in the long run profit from their capital-value increase. Those who presently can make payments on underwater mortgage loans actually have a good chance of profiting from the long-term increase in their capital value and at the same time enjoy a favorable credit rating, to say nothing of a clear conscience.

  • http://www.toddstadler.com/ tODD

    Peter (@52), you said, “a stock or bond trade is quite distinct from a mortgage contract.” But what you didn’t explain was: Why?

    “I frequently trade stocks and bonds but wouldn’t think of abrogating a mortgage or any serious usiness contract.” This isn’t “abrogating”, it’s returning the collateral (the house).

    Also, from a financial point of view, I don’t think most people “profit” whatsoever from their home mortgages. They may see the value of their home increase, but that ignores the vast amounts of interest they paid in the meantime. Of course, for most people, that’s just fine, since they also got to live in the house during that time.

  • http://www.toddstadler.com/ tODD

    Peter (@52), you said, “a stock or bond trade is quite distinct from a mortgage contract.” But what you didn’t explain was: Why?

    “I frequently trade stocks and bonds but wouldn’t think of abrogating a mortgage or any serious usiness contract.” This isn’t “abrogating”, it’s returning the collateral (the house).

    Also, from a financial point of view, I don’t think most people “profit” whatsoever from their home mortgages. They may see the value of their home increase, but that ignores the vast amounts of interest they paid in the meantime. Of course, for most people, that’s just fine, since they also got to live in the house during that time.

  • DonS

    Amy @ 51: Yes, I think many of us are refreshed by the level of discourse on this site. It is good for Christians to talk through these issues in a thoughtful way, especially with other Christians with whom we have disagreements. The Body of Christ needs this process — it helps us all to be a little more discerning about God’s will and purposes in this world.

    “Maybe you weren’t talking to me here (I never said that), as I agree that the Christian’s standard is the Bible, not the morality of others. The fact that the too-well-connected-to-fail banks are gorging on taxpayers is independent of our response. ” — YES! I was definitely not talking about you. I was speaking hypothetically, and expressing my own opinion only. I well recognize that I am not in the position of judge.

    Now, to more of my opinion :-) : Your analogy to trading (presumably stocks, bonds, and other such financial instruments) and “cutting your losses” is not the same as purchasing a home on credit. Since you say you have no debt, I am assuming that you don’t buy stock on margin, and thus own your shares outright. When you choose to cut your losses, you get whatever price the market provides for your shares, and the loss from what you paid is your’s alone. If you bought a home with cash, you could do precisely the same thing. But, when you buy a home on credit, you are risking someone else’s money, not your own. You can still “cut your losses”, if the home price drops, by selling it, which ends the mortgage contract. But such a voluntary sale, without pre-negotiating a short sale with the bank, will result in a deficiency unless you had paid a sufficient down payment to avoid it, which you would have to satisfy out of your personal funds. The only way to avoid liability for the deficiency is to negotiate a short sale or go through foreclosure. There is nothing immoral about trying to negotiate a short sale, imo. But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards. It’s not just about getting back at the banks.

    To clarify my earlier point about the 70 year old borrower, of course a 40 year old can and does do the same thing. Most of us purchase a home with a 30 year mortgage, and, on average sell within 5-10 years. This is a legal termination of the loan contract. But, as I explained above, the proceeds of the home sale are used to pay off the loan principal, and the borrower is responsible for any shortfall, unless they have pre-negotiated a short sale or defaulted and gone through foreclosure.

  • DonS

    Amy @ 51: Yes, I think many of us are refreshed by the level of discourse on this site. It is good for Christians to talk through these issues in a thoughtful way, especially with other Christians with whom we have disagreements. The Body of Christ needs this process — it helps us all to be a little more discerning about God’s will and purposes in this world.

    “Maybe you weren’t talking to me here (I never said that), as I agree that the Christian’s standard is the Bible, not the morality of others. The fact that the too-well-connected-to-fail banks are gorging on taxpayers is independent of our response. ” — YES! I was definitely not talking about you. I was speaking hypothetically, and expressing my own opinion only. I well recognize that I am not in the position of judge.

    Now, to more of my opinion :-) : Your analogy to trading (presumably stocks, bonds, and other such financial instruments) and “cutting your losses” is not the same as purchasing a home on credit. Since you say you have no debt, I am assuming that you don’t buy stock on margin, and thus own your shares outright. When you choose to cut your losses, you get whatever price the market provides for your shares, and the loss from what you paid is your’s alone. If you bought a home with cash, you could do precisely the same thing. But, when you buy a home on credit, you are risking someone else’s money, not your own. You can still “cut your losses”, if the home price drops, by selling it, which ends the mortgage contract. But such a voluntary sale, without pre-negotiating a short sale with the bank, will result in a deficiency unless you had paid a sufficient down payment to avoid it, which you would have to satisfy out of your personal funds. The only way to avoid liability for the deficiency is to negotiate a short sale or go through foreclosure. There is nothing immoral about trying to negotiate a short sale, imo. But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards. It’s not just about getting back at the banks.

    To clarify my earlier point about the 70 year old borrower, of course a 40 year old can and does do the same thing. Most of us purchase a home with a 30 year mortgage, and, on average sell within 5-10 years. This is a legal termination of the loan contract. But, as I explained above, the proceeds of the home sale are used to pay off the loan principal, and the borrower is responsible for any shortfall, unless they have pre-negotiated a short sale or defaulted and gone through foreclosure.

  • Peter Leavitt

    Todd, you don’t know what you’re talking about. Stock and bond exchanges are set up legally for the purpose of trading. A mortgage contract is viewed as a contractual obligation about which Don remarked There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    Unfortunately, unlike countries including Australia that have strict mortgage laws, America doesn’t allow banks recourse to other property, allowing scabrous people to go through with strategic defaults.

    In a better time in America we had the salutary notion of practically sacred business contracts. I was taught to be careful entering into any contract but to fulfill the contract no matter the cost.

  • Peter Leavitt

    Todd, you don’t know what you’re talking about. Stock and bond exchanges are set up legally for the purpose of trading. A mortgage contract is viewed as a contractual obligation about which Don remarked There is no question that if you stop making your mortgage payments, you have not fulfilled the obligation you agreed to.

    Unfortunately, unlike countries including Australia that have strict mortgage laws, America doesn’t allow banks recourse to other property, allowing scabrous people to go through with strategic defaults.

    In a better time in America we had the salutary notion of practically sacred business contracts. I was taught to be careful entering into any contract but to fulfill the contract no matter the cost.

  • ptl

    In my mind no one has addressed the “honor” of the highly educated and very moral investment bankers and their crony friends (most likely all from the best of schools, don’t you know, so they must be honorable?) who concocted the whole scheme in the first place. It’s really hard for me to blame the poor suckers at the lower end who drank the kool aid and believed the lie of the american home owner dream that system sold them. Why are the highly educated and oh so clever frat boys so guilty? Well, they, more than the unsophisticated lower class (who by the way, probably were brought up to believe that bankers and others of that type were honest, honorable, conservative, etc. etc. and would never enter into a bad deal or propose a bad deal, since they are in it to make money, right?) knew they could not sustain their credit default house of cards, nor the highly leveraged securitization of those toxic mortgages, nor the derivative upon derivative scheme, but they did it anyway? Where is the “honor” in that? Where is the “honor” of devising a system based on a pack of lies and horribly risky assets and then going out and selling that all around the world? And those are the folks we expected to protect the system from this kind of abuse, since they make their living from it! Just think of all those outrageous credit card fees, and over the limit fees, etc. etc. that only became possible and available in the past 10 or 20 years. Yes, many people who got credit cards should not have gotten them, but they did and they couldn’t make payments, or had late payments, or whatever…do you think that was not by design? Do you think the banks were surprised when that happened, or could it have been part of the profit equation? In the good old days, only folks with great credit got credit cards and it worked just fine, but that system didn’t raise enough profits for the banks. Well, actually it probably did for the generation that started those products, but enter the new generation from the top ten MBA programs…greedy, lusty (think of $6000 bottles of Petrus) and so smart and clever, but without the values and morals of their parents generation, for the most part. They changed all the old rules and made lots of money off those new and predictably unpredictable, except their unreliability, customers! You don’t think that that was factored into the equation that added up all the profits at the end of the day from all those late fees and late payments, etc. etc.? Then you may be interested in a bridge that may be for sale soon…a bridge to nowhere!

  • ptl

    In my mind no one has addressed the “honor” of the highly educated and very moral investment bankers and their crony friends (most likely all from the best of schools, don’t you know, so they must be honorable?) who concocted the whole scheme in the first place. It’s really hard for me to blame the poor suckers at the lower end who drank the kool aid and believed the lie of the american home owner dream that system sold them. Why are the highly educated and oh so clever frat boys so guilty? Well, they, more than the unsophisticated lower class (who by the way, probably were brought up to believe that bankers and others of that type were honest, honorable, conservative, etc. etc. and would never enter into a bad deal or propose a bad deal, since they are in it to make money, right?) knew they could not sustain their credit default house of cards, nor the highly leveraged securitization of those toxic mortgages, nor the derivative upon derivative scheme, but they did it anyway? Where is the “honor” in that? Where is the “honor” of devising a system based on a pack of lies and horribly risky assets and then going out and selling that all around the world? And those are the folks we expected to protect the system from this kind of abuse, since they make their living from it! Just think of all those outrageous credit card fees, and over the limit fees, etc. etc. that only became possible and available in the past 10 or 20 years. Yes, many people who got credit cards should not have gotten them, but they did and they couldn’t make payments, or had late payments, or whatever…do you think that was not by design? Do you think the banks were surprised when that happened, or could it have been part of the profit equation? In the good old days, only folks with great credit got credit cards and it worked just fine, but that system didn’t raise enough profits for the banks. Well, actually it probably did for the generation that started those products, but enter the new generation from the top ten MBA programs…greedy, lusty (think of $6000 bottles of Petrus) and so smart and clever, but without the values and morals of their parents generation, for the most part. They changed all the old rules and made lots of money off those new and predictably unpredictable, except their unreliability, customers! You don’t think that that was factored into the equation that added up all the profits at the end of the day from all those late fees and late payments, etc. etc.? Then you may be interested in a bridge that may be for sale soon…a bridge to nowhere!

  • Peter Leavitt

    ptl, granted that the standards of Wall Street have been in recent years to some extent corrupted, especially by business school graduates who are light on ethical and moral values. However, that’s no excuse for anyone to carelessly get involved with poor contracts, or to abrogate them when the market turns sour.

    You make some rather fair points, though your argument is essentially a one-sided populist one.

  • Peter Leavitt

    ptl, granted that the standards of Wall Street have been in recent years to some extent corrupted, especially by business school graduates who are light on ethical and moral values. However, that’s no excuse for anyone to carelessly get involved with poor contracts, or to abrogate them when the market turns sour.

    You make some rather fair points, though your argument is essentially a one-sided populist one.

  • ptl

    Thank you Peter for your comments…I always value your input and usually agree, and it’s even true in this case! Am not trying to say that everyone with an underwater mortgage should walk away, but they should direct their frustration at the real culprits behind the fiasco. Otherwise, it looks more and more like intra-class warfare….we, the financially prudent, against those idiots who took out the mortgages. Even those who did everything right are underwater, as this is a tide that lowered all ships! It just bothers me that it seems the only ones blamed are the ones who took out the so called predator loans, and in my mind, that is just a small percentage of the problem. The collapse of the overall larger financial institutions is the much bigger problem and a bunch of bad mortgages is not the answer to it.

    Isn’t there some principal in law, about someone who knows better, taking advantage of someone who does not? Probably not, since we are so proud of buying Manhattan for $24 worth of beads, or that’s how I heard the story, and that was clearly taking advantage of a situation, right? Well, don’t want to ramble on and on about my one-sided populism, so will just say am sure would agree with you on most things, and leave it at that.

    My only other thought is along these lines….you know how Reagan was credited for winning the cold war? Not by firing a shot, but by bankrupting the Soviet system with the Arms Race? We kept the pressure up with better and better weapons and they responded and poured so many resources into their weapons programs, that the civil and social order suffered tremendously and eventually was at least partly responsible for the supposedly redirection of the Government? Or something like that..am not much of a historian, or writer, sorry!

    Well, has anyone ever stopped to think that perhaps the near collapse of our financial system (which may not be over yet) was orchestrated from the outside, in the hopes that the collapse would lead to a breakdown of our own social and civil alignments and perhaps a change in our system and the end of our old way of doing things? Perhaps it was all a vast blank-wing conspiracy with our own demise as the ultimate result? Had heard for years that China was loaning us all the money with which to make all those bad loans, and finance the heavy credit card debt loads, as well making available all that cheap money so we could as a Nation continue to indulge our pleasures with expensive homes, luxuries, vacations, bloated government programs, etc. etc. Am surprised that any entity loaning out that vast amount of money would not know more about how secure their investments were. Or if you have so much money to loan, and lots more where that came from, then perhaps you don’t care as much if you get it all back? Or perhaps whatever damage is done, is worth the price in the end and you’ll recover your investment in other ways? Do you have an opinion on it? Have you heard of anything along these lines? Who could possibly benefit from our demise? Do we have any enemies? Or is it a bit too loony to even venture a comment?

  • ptl

    Thank you Peter for your comments…I always value your input and usually agree, and it’s even true in this case! Am not trying to say that everyone with an underwater mortgage should walk away, but they should direct their frustration at the real culprits behind the fiasco. Otherwise, it looks more and more like intra-class warfare….we, the financially prudent, against those idiots who took out the mortgages. Even those who did everything right are underwater, as this is a tide that lowered all ships! It just bothers me that it seems the only ones blamed are the ones who took out the so called predator loans, and in my mind, that is just a small percentage of the problem. The collapse of the overall larger financial institutions is the much bigger problem and a bunch of bad mortgages is not the answer to it.

    Isn’t there some principal in law, about someone who knows better, taking advantage of someone who does not? Probably not, since we are so proud of buying Manhattan for $24 worth of beads, or that’s how I heard the story, and that was clearly taking advantage of a situation, right? Well, don’t want to ramble on and on about my one-sided populism, so will just say am sure would agree with you on most things, and leave it at that.

    My only other thought is along these lines….you know how Reagan was credited for winning the cold war? Not by firing a shot, but by bankrupting the Soviet system with the Arms Race? We kept the pressure up with better and better weapons and they responded and poured so many resources into their weapons programs, that the civil and social order suffered tremendously and eventually was at least partly responsible for the supposedly redirection of the Government? Or something like that..am not much of a historian, or writer, sorry!

    Well, has anyone ever stopped to think that perhaps the near collapse of our financial system (which may not be over yet) was orchestrated from the outside, in the hopes that the collapse would lead to a breakdown of our own social and civil alignments and perhaps a change in our system and the end of our old way of doing things? Perhaps it was all a vast blank-wing conspiracy with our own demise as the ultimate result? Had heard for years that China was loaning us all the money with which to make all those bad loans, and finance the heavy credit card debt loads, as well making available all that cheap money so we could as a Nation continue to indulge our pleasures with expensive homes, luxuries, vacations, bloated government programs, etc. etc. Am surprised that any entity loaning out that vast amount of money would not know more about how secure their investments were. Or if you have so much money to loan, and lots more where that came from, then perhaps you don’t care as much if you get it all back? Or perhaps whatever damage is done, is worth the price in the end and you’ll recover your investment in other ways? Do you have an opinion on it? Have you heard of anything along these lines? Who could possibly benefit from our demise? Do we have any enemies? Or is it a bit too loony to even venture a comment?

  • ptl

    Also, agree with almost everything Amy Scott says! The Bible does not like debt, and one could say most of our fore-fathers felt the same way. One should enter into any debt for only the most serious and solemn purposes. We all would be a lot better off if we returned to that kind of attitude.

  • ptl

    Also, agree with almost everything Amy Scott says! The Bible does not like debt, and one could say most of our fore-fathers felt the same way. One should enter into any debt for only the most serious and solemn purposes. We all would be a lot better off if we returned to that kind of attitude.

  • http://humblemusings.com Amy Scott

    Thanks for the replies.

    Amy, a stock or bond trade is quite distinct from a mortgage contract.

    Well, yes, of course. I only meant to convey that I view the situation in a strictly legal /business sense, letting the moral side be satisfied because the legal side is, understanding the contract is between a human and a non-human so there is no implied moral obligation that one might find between, say, family members. I hope that makes more sense. (Maybe not.)

    The banks gave loans they 100% foreknew couldn’t be repaid. How, then, is there an implied moral obligation here for repayment in cash? (Honest question, not sarcastic.) If someone could answer this for me, I could reconsider that these legal contracts insinuate a moral obligation to choose option A instead of option B.

    I don’t feel morally obligated to make nice-nice with a vampire squid. I feel obligated honor the terms of the contract (including exercising the backstop), which means that I would hand over the keys and satisfy any recourse instead of squatting in the house for the next two years.

    Those who presently can make payments on underwater mortgage loans actually have a good chance of profiting from the long-term increase in their capital value and at the same time enjoy a favorable credit rating, to say nothing of a clear conscience.

    Whether one profits or not is immaterial to the discussion, I should think. I’d also like to sell you something (like my own house….) for what I paid for it if you really think it’s a good long-term investment. I’m smoking the same thing PTL (and Ron Paul) is, and I don’t believe this is going to end well.

    I’m guessing you didn’t short the builders and banks then, eh? ;)

    But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards.

    I guess I already explained why I didn’t think it was immoral. I do wonder if the generally held social stigma is trumping any consideration of what I said (assuming I offered any sound reason). I should think the banksters would love for us to feel morally obligated (and perhaps my own tax burden is trumping my ability to feel sorry for them).

    As far as whether or not it hurts anyone, see PTLs comments. The problem is not people defaulting. The problem is that the oligarchy runs the government. I feel like talking about borrowers defaulting and its effect on the economy is like talking about the leak in a New Orleans bathtub right before Katrina.

    I’m still thinking about this. Thanks for talking through it with me.

  • http://humblemusings.com Amy Scott

    Thanks for the replies.

    Amy, a stock or bond trade is quite distinct from a mortgage contract.

    Well, yes, of course. I only meant to convey that I view the situation in a strictly legal /business sense, letting the moral side be satisfied because the legal side is, understanding the contract is between a human and a non-human so there is no implied moral obligation that one might find between, say, family members. I hope that makes more sense. (Maybe not.)

    The banks gave loans they 100% foreknew couldn’t be repaid. How, then, is there an implied moral obligation here for repayment in cash? (Honest question, not sarcastic.) If someone could answer this for me, I could reconsider that these legal contracts insinuate a moral obligation to choose option A instead of option B.

    I don’t feel morally obligated to make nice-nice with a vampire squid. I feel obligated honor the terms of the contract (including exercising the backstop), which means that I would hand over the keys and satisfy any recourse instead of squatting in the house for the next two years.

    Those who presently can make payments on underwater mortgage loans actually have a good chance of profiting from the long-term increase in their capital value and at the same time enjoy a favorable credit rating, to say nothing of a clear conscience.

    Whether one profits or not is immaterial to the discussion, I should think. I’d also like to sell you something (like my own house….) for what I paid for it if you really think it’s a good long-term investment. I’m smoking the same thing PTL (and Ron Paul) is, and I don’t believe this is going to end well.

    I’m guessing you didn’t short the builders and banks then, eh? ;)

    But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards.

    I guess I already explained why I didn’t think it was immoral. I do wonder if the generally held social stigma is trumping any consideration of what I said (assuming I offered any sound reason). I should think the banksters would love for us to feel morally obligated (and perhaps my own tax burden is trumping my ability to feel sorry for them).

    As far as whether or not it hurts anyone, see PTLs comments. The problem is not people defaulting. The problem is that the oligarchy runs the government. I feel like talking about borrowers defaulting and its effect on the economy is like talking about the leak in a New Orleans bathtub right before Katrina.

    I’m still thinking about this. Thanks for talking through it with me.

  • ptl

    From Amy’s email, a quote from another comment….

    But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards.

    OMG wow, this is great! So it’s immoral if enough of us little guys do the above cuz it hurts so many of our brethren? But is it not even more immoral, or equally immoral, when the house of cards you created collapses and everything and everybody is under water? Gosh, it just amazes me what a pass the oligarchy give to each other on this fiasco and how willing they are to blame the poor little sucker at the end of that food chain. Like the Church Lady from SNL says “how convenient!” Am sure there are several Bible versus that talk about taking advantage of the poor and desperate? Some where in Proverbs? Can an honorable representative from the Oligarchy help me out here and come up with something to back up my point? Or their point?

    You are right on in my eyes Amy, thank you!

  • ptl

    From Amy’s email, a quote from another comment….

    But, if you choose the foreclosure option merely for the convenience of transferring your investment loss to your bank, imo that is immoral. And, ultimately, when enough folks do that, it hurts other folks, through higher interest rates and tougher loan standards.

    OMG wow, this is great! So it’s immoral if enough of us little guys do the above cuz it hurts so many of our brethren? But is it not even more immoral, or equally immoral, when the house of cards you created collapses and everything and everybody is under water? Gosh, it just amazes me what a pass the oligarchy give to each other on this fiasco and how willing they are to blame the poor little sucker at the end of that food chain. Like the Church Lady from SNL says “how convenient!” Am sure there are several Bible versus that talk about taking advantage of the poor and desperate? Some where in Proverbs? Can an honorable representative from the Oligarchy help me out here and come up with something to back up my point? Or their point?

    You are right on in my eyes Amy, thank you!

  • DonS

    Thank you as well, Amy. I clicked through to your blog — very impressive!

    Let me emphasize that I have no great love for Big Finance — many of the large banks deserve exactly what they got because of their irresponsible lending practices, greed, and cozy and corrupt relationships with senior legislators and regulators. You pose a good question: “The banks gave loans they 100% foreknew couldn’t be repaid. How, then, is there an implied moral obligation here for repayment in cash? (Honest question, not sarcastic.) ”

    My answer to that question is that this is probably true for the subprime lenders who were lending 100% with no down and very low teaser rates. But, they got exactly what they deserved. Very few of their clients (by definition, poor credit risks) were able to keep up their loans once the rates ratcheted up, and because of the real estate crash, they could not recoup their principle through foreclosure. However, I don’t think that was true for more conventional loans, with down payments. Those lenders expected the borrowers to make their payments and, if not, that foreclosure would allow them to at least break even because of borrower equity. They also knew that these borrowers were better risks. Thus, my opinion that a borrower who strategically defaults on a mortgage when they have the ability to pay, because they want to cut their losses and transfer at least part of that loss to the lender, has a serious moral issue to consider as a Christian. Rationalizing that issue on the basis that all bankers are corrupt and dishonorable is difficult for me to swallow. Firstly, Christ didn’t only love the lovely. He focused on the unlovely and the corrupt (Zaccheus, the tax collector, comes to mind). We should not repay evil with evil. Secondly, not all bankers are evil.

    JMHO.

  • DonS

    Thank you as well, Amy. I clicked through to your blog — very impressive!

    Let me emphasize that I have no great love for Big Finance — many of the large banks deserve exactly what they got because of their irresponsible lending practices, greed, and cozy and corrupt relationships with senior legislators and regulators. You pose a good question: “The banks gave loans they 100% foreknew couldn’t be repaid. How, then, is there an implied moral obligation here for repayment in cash? (Honest question, not sarcastic.) ”

    My answer to that question is that this is probably true for the subprime lenders who were lending 100% with no down and very low teaser rates. But, they got exactly what they deserved. Very few of their clients (by definition, poor credit risks) were able to keep up their loans once the rates ratcheted up, and because of the real estate crash, they could not recoup their principle through foreclosure. However, I don’t think that was true for more conventional loans, with down payments. Those lenders expected the borrowers to make their payments and, if not, that foreclosure would allow them to at least break even because of borrower equity. They also knew that these borrowers were better risks. Thus, my opinion that a borrower who strategically defaults on a mortgage when they have the ability to pay, because they want to cut their losses and transfer at least part of that loss to the lender, has a serious moral issue to consider as a Christian. Rationalizing that issue on the basis that all bankers are corrupt and dishonorable is difficult for me to swallow. Firstly, Christ didn’t only love the lovely. He focused on the unlovely and the corrupt (Zaccheus, the tax collector, comes to mind). We should not repay evil with evil. Secondly, not all bankers are evil.

    JMHO.

  • DonS

    ptl @ 61: You quoted my earlier post, so I’m guessing that I am a member of the Oligarchy? Giving my “brethren” a pass, so that they can stick it to the little guy? OK. I guess I don’t really know how I achieved such a vaunted status, especially since I raise 5 kids and pay a large mortgage just like everyone else here in southern California. But, whatever.

  • DonS

    ptl @ 61: You quoted my earlier post, so I’m guessing that I am a member of the Oligarchy? Giving my “brethren” a pass, so that they can stick it to the little guy? OK. I guess I don’t really know how I achieved such a vaunted status, especially since I raise 5 kids and pay a large mortgage just like everyone else here in southern California. But, whatever.

  • Larry

    Luther actually writes extensively on this issue of economics and in particular usury. Some might cry that Luther didn’t see our modern society as we do, but as is more usual than not Luther saw all too clearly with prophetic insight such issues.

    This is just a short quote from a much more extensive writing of Luther’s on trading and usury. Perhaps it is time in our economic travail and day and age for some good Lutheran to write a nice book on this issue discussing what Luther lays out. It may fit nicely in the realm of vocation.

    “That this common practice is wrong and is true usury I have shown sufficiently in the Discourse on Usury. I must give one more illustration to show how borrowing and lending leads to misfortune. When some people see that a buyer is unreliable and does not meet his payments, they can repay themselves finely in this way. I get a strange merchant to go and buy that man’s goods to the amount of a hundred gulden or so, and say: “When you have bought all his goods, promise him cash or refer him to a certain man who owes you money; and when you have the goods bring him to me, as though I owed you money and act as though you did not know that he is in my debt; thus I shall be paid and will give him nothing.” That is called “finance” and ruins the poor man entirely together with all whom he may owe; but so it goes in this unchristian borrowing and lending. “

  • Larry

    Luther actually writes extensively on this issue of economics and in particular usury. Some might cry that Luther didn’t see our modern society as we do, but as is more usual than not Luther saw all too clearly with prophetic insight such issues.

    This is just a short quote from a much more extensive writing of Luther’s on trading and usury. Perhaps it is time in our economic travail and day and age for some good Lutheran to write a nice book on this issue discussing what Luther lays out. It may fit nicely in the realm of vocation.

    “That this common practice is wrong and is true usury I have shown sufficiently in the Discourse on Usury. I must give one more illustration to show how borrowing and lending leads to misfortune. When some people see that a buyer is unreliable and does not meet his payments, they can repay themselves finely in this way. I get a strange merchant to go and buy that man’s goods to the amount of a hundred gulden or so, and say: “When you have bought all his goods, promise him cash or refer him to a certain man who owes you money; and when you have the goods bring him to me, as though I owed you money and act as though you did not know that he is in my debt; thus I shall be paid and will give him nothing.” That is called “finance” and ruins the poor man entirely together with all whom he may owe; but so it goes in this unchristian borrowing and lending. “

  • Larry

    There are a LOT of moral issues in loaning money on all sides. In the biggest picture is it at all moral for a lending institution to fundamentally make all interest on all loans given out greater than all interest on all savings accounts offered? Is it rudimentary moral for one to take MY money on the one hand, use it and only give me a paltry 5% then on the other hand loan me money (that is not fundamentally the institutions money but other monies of other peoples they are utilizing under the savings scheme) at 8%?

    One might argue that it is ALL immoral because its fundamentally just a crack addict going to crack dealer under the over used guised of its practical for economics to function this way, and I would not disagree. Thus gained in all this and lost, is simply paper and money, wealth for the sake of wealth and not actual products for the neighbor under actual vocations serving the neighbor. Any actual products produced to love the neighbor are viewed more or less informally at best as a by-product of such borrowing/lending and at worse a necessary evil. A LOT of this goes under the façade of “it helps produce the tangible products” when in reality the reality under the mask is simply the amassing of money by all involved.

    There’s a certain relief in faith that says, “I may not know what I will have tomorrow but I rest in the Word of God.” This is not a workless faith but as Luther points out in a sermon on Peter being told by Jesus to cast his net at the worse time to fish and getting more fish than he can hold, as opposed to fishing hard during the best time (all night) and receiving nothing; here Jesus shows work is good but in and of itself vain and ONLY can strength and increase come at the Word given, “cast your nets”, not the work itself. In fact often God shows us, painfully, our work is vain in order to make us rest in His Word and cast cares upon Him. Thus, it is fine to work a save, but it is sinful, idolatry, to do so such that I’m anxious and worrying INTO the future about my “nest egg”. I may loose my nest egg, if you have one, in order to live only by the Word alone. IF I live a long life and IF I have no nest egg in those years, so be it, I will be given what I need at that time. That does not prevent or discourage me from work (vocation) but discourages my trust in my work, and simultaneously by this release and to trust in the Word for strength and increase, encourages me to work. As Luther said well eat and drink and let God give you health. Otherwise its idolatry.

    L

  • Larry

    There are a LOT of moral issues in loaning money on all sides. In the biggest picture is it at all moral for a lending institution to fundamentally make all interest on all loans given out greater than all interest on all savings accounts offered? Is it rudimentary moral for one to take MY money on the one hand, use it and only give me a paltry 5% then on the other hand loan me money (that is not fundamentally the institutions money but other monies of other peoples they are utilizing under the savings scheme) at 8%?

    One might argue that it is ALL immoral because its fundamentally just a crack addict going to crack dealer under the over used guised of its practical for economics to function this way, and I would not disagree. Thus gained in all this and lost, is simply paper and money, wealth for the sake of wealth and not actual products for the neighbor under actual vocations serving the neighbor. Any actual products produced to love the neighbor are viewed more or less informally at best as a by-product of such borrowing/lending and at worse a necessary evil. A LOT of this goes under the façade of “it helps produce the tangible products” when in reality the reality under the mask is simply the amassing of money by all involved.

    There’s a certain relief in faith that says, “I may not know what I will have tomorrow but I rest in the Word of God.” This is not a workless faith but as Luther points out in a sermon on Peter being told by Jesus to cast his net at the worse time to fish and getting more fish than he can hold, as opposed to fishing hard during the best time (all night) and receiving nothing; here Jesus shows work is good but in and of itself vain and ONLY can strength and increase come at the Word given, “cast your nets”, not the work itself. In fact often God shows us, painfully, our work is vain in order to make us rest in His Word and cast cares upon Him. Thus, it is fine to work a save, but it is sinful, idolatry, to do so such that I’m anxious and worrying INTO the future about my “nest egg”. I may loose my nest egg, if you have one, in order to live only by the Word alone. IF I live a long life and IF I have no nest egg in those years, so be it, I will be given what I need at that time. That does not prevent or discourage me from work (vocation) but discourages my trust in my work, and simultaneously by this release and to trust in the Word for strength and increase, encourages me to work. As Luther said well eat and drink and let God give you health. Otherwise its idolatry.

    L

  • phil

    Usury is interest. Interest, it appears, is not well received in the bible. Just a thought.

    8 One who increases his possessions by usury and extortion Gathers it for him who will pity the poor. (Proverbs 28:8)

    19 ” You shall not charge interest to your brother — interest on money or food or anything that is lent out at interest.
    20 “To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)

    7 If he has not oppressed anyone, But has restored to the debtor his pledge; Has robbed no one by violence, But has given his bread to the hungry And covered the naked with clothing;
    8 If he has not exacted usury Nor taken any increase, But has withdrawn his hand from iniquity And executed true judgment between man and man;
    9 If he has walked in My statutes And kept My judgments faithfully — He is just; He shall surely live!” Says the Lord GOD. (Ezekiel 18:7-9)
    ———

    13 If he has exacted usury Or taken increase — Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him. (Ezekiel 18:13)

    11 Now as they heard these things, He spoke another parable, because He was near Jerusalem and because they thought the kingdom of God would appear immediately.
    12 Therefore He said: “A certain nobleman went into a far country to receive for himself a kingdom and to return.
    13 “So he called ten of his servants, delivered to them ten minas, and said to them, ‘Do business till I come.’
    14 “But his citizens hated him, and sent a delegation after him, saying, ‘We will not have this man to reign over us.’
    15 “And so it was that when he returned, having received the kingdom, he then commanded these servants, to whom he had given the money, to be called to him, that he might know how much every man had gained by trading.
    16 “Then came the first, saying, ‘Master, your mina has earned ten minas.’
    17 “And he said to him, ‘Well done, good servant; because you were faithful in a very little, have authority over ten cities.’
    18 “And the second came, saying, ‘Master, your mina has earned five minas.’
    19 “Likewise he said to him, ‘You also be over five cities.’
    20 “Then another came, saying, ‘Master, here is your mina, which I have kept put away in a handkerchief.
    21 ‘For I feared you, because you are an austere man. You collect what you did not deposit, and reap what you did not sow.’
    22 “And he said to him, ‘Out of your own mouth I will judge you, you wicked servant. You knew that I was an austere man, collecting what I did not deposit and reaping what I did not sow.
    23 ‘Why then did you not put my money in the bank, that at my coming I might have collected it with interest?’
    24 “And he said to those who stood by, ‘Take the mina from him, and give it to him who has ten minas.’
    25 (“But they said to him, ‘Master, he has ten minas.’)
    26 ‘For I say to you, that to everyone who has will be given; and from him who does not have, even what he has will be taken away from him. (Luke 19:11-26)

  • phil

    Usury is interest. Interest, it appears, is not well received in the bible. Just a thought.

    8 One who increases his possessions by usury and extortion Gathers it for him who will pity the poor. (Proverbs 28:8)

    19 ” You shall not charge interest to your brother — interest on money or food or anything that is lent out at interest.
    20 “To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)

    7 If he has not oppressed anyone, But has restored to the debtor his pledge; Has robbed no one by violence, But has given his bread to the hungry And covered the naked with clothing;
    8 If he has not exacted usury Nor taken any increase, But has withdrawn his hand from iniquity And executed true judgment between man and man;
    9 If he has walked in My statutes And kept My judgments faithfully — He is just; He shall surely live!” Says the Lord GOD. (Ezekiel 18:7-9)
    ———

    13 If he has exacted usury Or taken increase — Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him. (Ezekiel 18:13)

    11 Now as they heard these things, He spoke another parable, because He was near Jerusalem and because they thought the kingdom of God would appear immediately.
    12 Therefore He said: “A certain nobleman went into a far country to receive for himself a kingdom and to return.
    13 “So he called ten of his servants, delivered to them ten minas, and said to them, ‘Do business till I come.’
    14 “But his citizens hated him, and sent a delegation after him, saying, ‘We will not have this man to reign over us.’
    15 “And so it was that when he returned, having received the kingdom, he then commanded these servants, to whom he had given the money, to be called to him, that he might know how much every man had gained by trading.
    16 “Then came the first, saying, ‘Master, your mina has earned ten minas.’
    17 “And he said to him, ‘Well done, good servant; because you were faithful in a very little, have authority over ten cities.’
    18 “And the second came, saying, ‘Master, your mina has earned five minas.’
    19 “Likewise he said to him, ‘You also be over five cities.’
    20 “Then another came, saying, ‘Master, here is your mina, which I have kept put away in a handkerchief.
    21 ‘For I feared you, because you are an austere man. You collect what you did not deposit, and reap what you did not sow.’
    22 “And he said to him, ‘Out of your own mouth I will judge you, you wicked servant. You knew that I was an austere man, collecting what I did not deposit and reaping what I did not sow.
    23 ‘Why then did you not put my money in the bank, that at my coming I might have collected it with interest?’
    24 “And he said to those who stood by, ‘Take the mina from him, and give it to him who has ten minas.’
    25 (“But they said to him, ‘Master, he has ten minas.’)
    26 ‘For I say to you, that to everyone who has will be given; and from him who does not have, even what he has will be taken away from him. (Luke 19:11-26)

  • Reilly

    The biblical scripture Deutronomy 23:19-20 is dictation by god as to the proper laws which should be followed by any nation. No interest shall be charged to any countrymen but may be charged to a non contrymen or member of another nation. Interest can be used as a weapon by other nations or individuals of other nations. God did not want to allow anybody in your nation to charge you interest in that it could interfere with the economy. Interest can be used by organized crime or forign nations .Deutronomy 23:19-20 is also considered a prophecy and will be adopted as the law of the land. The government will change the laws conserning lending. Large ticket items such as Homes or Cars will only be purchased by cash or by statutory rent to own agreements. Deutronomy considers lenders of this type to be a real problem which threatens the nations economy. Homes will be considered places to live and not an investment. No loans shall issue on them.

  • Reilly

    The biblical scripture Deutronomy 23:19-20 is dictation by god as to the proper laws which should be followed by any nation. No interest shall be charged to any countrymen but may be charged to a non contrymen or member of another nation. Interest can be used as a weapon by other nations or individuals of other nations. God did not want to allow anybody in your nation to charge you interest in that it could interfere with the economy. Interest can be used by organized crime or forign nations .Deutronomy 23:19-20 is also considered a prophecy and will be adopted as the law of the land. The government will change the laws conserning lending. Large ticket items such as Homes or Cars will only be purchased by cash or by statutory rent to own agreements. Deutronomy considers lenders of this type to be a real problem which threatens the nations economy. Homes will be considered places to live and not an investment. No loans shall issue on them.


CLOSE | X

HIDE | X