Friday, February 10, 2012

The Disastrous and Unfair Mortgage Settlement

Adults understand that in life, actions have consequences and that misdeeds should not be rewarded. Children do not.

Furthermore, if an action has a reward then people will do more of it to get the reward.

Somehow, the two basic life principles of consequences and rewards have eluded President Obama, US Attorney General Holder and the various State Attorneys General. This Triumvirate are the unstopped bullies in the school cafeteria who feel no remorse at taking whatever food and snacks they want from the other kids in the lunchroom.

All homeowners suffered an economic loss from the downturn in home prices. Additionally, a recent Atlanta Federal Reserve Bank study (see my post, More Mortgage Borrower Rights Delay But Do Not Decrease Foreclosures) found that mortgage modifications do not decrease the number of defaults and foreclosures. The Obama Holder bullies are just being mean towards the banks in order to take corporate and shareholder money and give it to their friends.

Pity the poor US souls who delayed buying a house until they saved up a larger down payment, bought a house within their means and are neither in default or underwater on their mortgage. Pity the poor US souls who honored their legal mortgage loan responsibilities and made cutbacks in their discretionary spending so they could meet their monthly mortgage payments. Pity the poor US souls who watched their homes' values decline, who honored their commitments and who acted like adults. Pity these poor US souls because their elected President and his appointees ignored their honesty and maturity and instead rewarded their spoiled childlike siblings who disavowed their family chores and played.

The announced US and state mortgage settlement with the banks rewards dereliction and creates a perverse incentive for people to avoid their obligations. Obama and his cohorts are teaching people that misbehavior does not have negative consequences and in fact that ignoring one's commitments deserves a reward.

All homeowners, not just those who were derelict in meeting their mortgage payments, saw their wealth and home values decline from the downturn in home prices. A homeowner with an underwater mortgage is not a protected class of persons, in the legal and constitutional sense, such as race or gender. The US government faces a higher legal standard for treating one class of its citizens differently than when the class is constitutionally legally protected. It would seem that those citizens who would be entitled to reimbursement under the mortgage settlement except that they did not default on their mortgage or they made a larger down payment and are not underwater could sue the US government and claim that they are unfairly and unconstitutionally discriminated against by the US and state governments. Maturity, delaying gratification and honoring one's obligations are not legally justifiable reasons for different treatment by the US government or the states.

The child in the White House needs to learn that actions have consequences.


  1. While we appreciate your position, we happen to be two educated white collar responsible adults who planned well for a rainy day. However after two years of unemployment, depleting all savings, stock and college funds, we were finally unable to make our mortgage payments. This is NOT a consequence of our poor actions. We had the back-up reserve, but you can only plan for so much. We are a casualty of business greed. My husband and I worked hard to purchase our home and build a life with our chilren. While teaching our children that every action has a consequence, we are at a loss for words when we attempt to explain our situation. We did all the right things...strong rainy day funds, long time loyalty to an organization and a good education (BS and MBA's)... so why/how do we find ourselves in this position? How do we explain our responsible actions led to this poor consequence. Seems like Obama is looking out for someone like us. Greed put us here, not our responsible actions. The banks and overpaid executives need to face the consequences for thier actions. Thank you. California resident.

  2. This is a complex issue that cannot be boiled down to just moral malfeasance at the individual level. The life size brush you use to paint a picture of everyone with mortgage problems distorts and simplifies the issue to the point of looking ignorant.
    Not one of your better posts.