Here is an interview that I did in early February 2010.
Many entities, from the White House to various mortgage banking leaders to self-professed pundits, are trying to put a shame element to borrowers who find themselves with acute negative equity in their homes. Is it possible to successfully shame these people into staying in their mortgage loans and not walk away from their homes?
DeCoster: Federal officials like former Treasury Secretary Hank Paulson, along with powerful special interests that profit from central planning policies, have an interest in keeping people hogtied to the sinking housing market. They are trying to depict struggling Americans as irresponsible scoundrels who are recklessly walking away from their commitments. In fact, the multi-millionaire Hank Paulson, who was one of the architects of the Wall Street bailout, told the Wall Street Journal that borrowers “have a responsibility to keep paying.” That’s a pretty broad statement to make that: 1) ignores the default option on the typical mortgage contract, and 2) disregards each homeowner’s unique options and financial situation.
The broad statement was intentional. The overall scheme calls for treating each individual debtor as one piece of a collective pool of citizens who shall be enslaved by the collapsing economy. The people who insisted, for years, that there was no housing bubble, no debt dilemma, and no recession on the horizon are the same people who are now telling us that everything is fixed, the recession is over, and therefore we should go back to our old habits — buy more stuff we don’t need, take out more loans, and buy houses and cars. The government has subsidized the purchase of both cars and houses, in spite of the fact that an abundance of Americans are still saddled with debt and holding underwater mortgages.
The Obama administration, in its massive campaign to socially engineer America, is pressuring banks into renegotiating mortgage payments in order to keep people captive in their mortgages. The goal of the elites in power is to keep up the appearance of prosperity and keep folks in debt to the big banks. Mass defaults will injure Wall Street — Washington D.C’s favorite constituency. Additionally, there’s John Courson, an FOB (Friend of Banksters) who runs all over the country trying to spread the moral message to middle-class people who are pawns in this Bankster mess. Courson is the Chief Executive of the Mortgage Banker’s Association, so whose interests do you think he is representing? Courson advising homeowners on their moral and financial strategies is like a crocodile telling the neighborhood children they should take a shortcut home through the swamp. These so-called “leaders,” unfortunately, have the necessary wealth, political power, and media access that enable them to introduce their disingenuous platform and influence the masses. For those who aren’t empowered by the political establishment, there’s no equal opportunity for commanding the public stage.
The schemers know they don’t have to deal with a level playing field, so yes, it is possible to shame people into debt subservience. In fact, the masses are already succumbing to the morality message. The elites don’t give a damn about the plight of average people who have little to no financial knowledge, feel trapped, and have nowhere to turn. That’s why those folks need to reach out to a local CPA or other financial advisor they can trust. Furthermore, they need to tune out the moralizing that flows from the fat cats and special interests that get wealthy by keeping them equity deficient.
Why is it that strategic defaulting at a corporate level is not actively challenged, but it is being challenged at a consumer level?
DeCoster: The notion of approving business defaults while flogging one’s neighbor for walking away from his mortgage is entirely irrational. One snag is that the general masses have no understanding of financial matters. No matter how “educated” they may be in the college sense, they are financially ignorant and cannot conduct basic analyses of their own financial matters, let alone weigh the costs and benefits of a complicated situation that is unique to another individual. There are plenty of talented and smart people who don’t have the skills to sort out budgets, expenses, debt, and investments. That is not a criticism — it is just a fact.
The condemnation of homeowner defaults is brought on by a knee-jerk, emotive response. People feel — they don’t think. You can thank public schools for teaching self-esteem and groupthink as opposed to business and analytical/critical thinking skills. The public schools are churning out a nation of drones, or trained monkeys, as I like to say it. Welcome to the Oprahized nation where logic and reason are abandoned in favor of emotionalizing hot-button issues for the purpose of “feeling better.”
Challenging other people on this issue, when you know nothing about their state of affairs, is something that is fired off from the gut level. The morality element is a great focal point for drawing out emotional energy. Focusing on other peoples’ behavior that you deem evil, while you avoid the objective aspects of the issue, is pathetic.
An individual’s financial options can be objectively assessed and the most favorable course of action can generally be determined. Businesses entrepreneurs and managers are constatntly analyzing and estimating various strategies, and that is how businesses become enduring and profitable. Individuals and households are no different in terms of planning best course scenarios and minimizing waste and losses. Except individuals and households suffer personally and emotionally by bearing an unfavorable financial condition. For that reason, they must take actions to alleviate uncertainty and keep their financial house in order.
Karen DeCoster, CPA [send her mail] has a Master of Arts in Economics, and is an accounting/finance professional in Detroit. She recently published "It May Be Financially Irresponsible to Pay Your Mortgage." Her website is at Karendecoster.com.