So we're here again?
April 2005 Harry Reid let the Republicans pass a law that made it virtually impossible to discharge credit card debt through bankruptcy. May 2009, Harry Reid and the Democrats pass a law that make it harder for credit cards to drive you into bankruptcy. In between, all the mortgages blow up. I've always been entertained by the fact that the Washington Mutual credit card arm lobbied heavily to make it so people couldn't skip out on their credit cards and blew up Washington Mutual's mortgage arm (and the whole of the 99-year-old institution) in the process.
The study cited by the author about "strategic default" is specious as a mutherfucker, by the way. It argues that you aren't performing a "strategic default" if you don't have the liquid assets to pay your mortgage. Under that argument, my cousin didn't default on her mortgage... because she didn't have to sell her car. But then, most people have about enough liquid assets to pay their rent and that's it.
Fact of the matter is, she literally moved her shit next door into an identical rental in Reno and went from a $1900/mo mortgage payment to a $600/mo rental payment.
Articles like this are never satisfying because they don't (can't) cover all the externalities and leave you feeling as if anything is ever going to change. We did that whole "moral hazard" thing ten years ago when the banks were blowing up because ten years ago, nobody gave a fuck about banks either. And that was before BofA was caught laundering money for the Cali cartel, before Wells Fargo agreed to a billion dollars in fines for shafting people with phantom accounts and hidden fees. Mortgages are a contract, and we said that last time, too, and for people like my cousin it saved 'em $1300 a month in expenses but listen.
I bought a car in 2002 with stellar credit. It was $9500. I put down $1000 and paid $270 a month. A buddy bought a truck in 2002 with shitty credit. It was $9000. He put down $2000 and paid $700 a month.
A mortgage is a contract but the guys that write mortgages have more experience with contracts than you do. And they talk. And if you renege on a contract, you're going to have a harder time writing contracts in the future, and those contract writers have managed to make their contracts matter to shit well beyond whether or not you can afford a Honda.
Is it that corporations are being immorally selfish by strategically defaulting and we should hold them to stricter moral standards? Or is it that moralizing about debt is a cynical weapon deployed by creditors to increase their revenue, and we should all default when it’s strategic to do so?
Most of these sorts of articles drastically underestimate the strategic consequences of defaulting on loans. I don't. That's why banks throw money at me. Wanna talk white privilege? Be 18. Go to college. Sign up for a half-dozen credit cards in exchange for t-shirts. Carry a balance because 18. Pay it off because college job. NEVER HAVE TO WORRY ABOUT SHORT-TERM CASH FLOW PROBLEMS EVER AGAIN. "What's that, lassie? The radiator exploded? Well, shit, let me whip out my iPhone X, notify AAA, hire an Uber and make it into Starbuck's on time anyway. It's gonna suck paying $500 for a new radiator and $40 a day to get to and from work for the next three days but there's no question I can dig up $700 to maintain my precarious lifestyle. Good thing I'm white!"
So yeah - you should care about your bank prolly even less than they care about you. But you also need to recognize that if you get in a blood feud with your bank, you're gonna lose, mutherfucker, and you're gonna lose big.