Readers responding to a July 23 column (Delta Farm Press, Long on cash, short on character) have not been short on opinion. The column was about wealthy Americans employing strategic defaults to get out of their mortgages. Strategic default is a euphemism for walking out on a home loan because it’s become a bad investment.
My belief is that homeowners, wealthy or not, are ultimately responsible for accepting the risk of ownership, including loss of value. Commodity producers know this risk all too well.
But readers point out a number of other reasons for the rash of failed mortgages which continue to lean on the U.S. economy. Here are some comments:
“In the last ten years, there has been a huge shift in real estate marketing,” said one reader. “Homes are marketed as investments. Over time, the prices and values of these investment homes have been artificially inflated by brokers, bankers, and appraisers.
“When the illusion of the inflated value collapsed, many people were left with an investment that lost 25 percent or more of its initial value. These investments are gifts that keep on giving because they have years of interest payments remaining.
“I believe that the collusion between bankers, brokers, and appraisers makes this a transaction in bad faith. The investor has every right to walk away.”
Another reader noted, “The blame falls squarely on the borrowers, who either knew they could not afford such extravagances, or knew they would not honor their end of the bargain if things went against them. Nobody made them borrow the first dime.
“Indeed, if America is ever to be great again, individuals must exhibit responsibility. Individuals make up companies, banks, farms, government, organizations of every type and kind. Individuals inform all manner of entities with their personal ethics. The entity is the sum of the parts.”
Another reader speaks to the issue from personal experience. “If you’re going to write articles about financial character, you should do an exposé on Chase keeping millions of Americans on the hook for half a million dollars (in my case) even though they only paid a few thousand for our homes.”
Another wonders if perhaps America has grown greedy, or at least, severely lacking in budgetary restraint.
“I think the housing mess has less to do with lack of personal ethics and more to do with unchecked greed. Someone shouldn’t purchase a $500,000-plus home when they make $30,000 (I live in California and it happened all over the place).
“Everyone wanted houses way out of their affordability range, and the banks helped them do it. Rich. Poor. Mortgage brokers. Banks. Greed from every party. Unfortunately, those that didn’t participate are now stuck with the bill.”