A Fairness Argument
Readers suggested a topic on loans in default. “Design a ‘fair’ way to undo a bad loan made by a bank. Here’s my shot. And, for the record, I’m not talking law here, or not exclusively. I’m talking fair within a framework of a contract. And lets assume for the exercise that the bank actually owns the loan. It will just make writing this all out a lot easier.”
“If the person cannot reasonably pay the loan, then it has to be undone somehow. However, being approved for more loan than they could reasonably pay, doesn’t change the fact that they borrowed money. Here is a place where I can see a fairness argument coming into play. If the person was steered into a rate much higher than the rate they actually qualified for, that is a place where the bank should take a hit. If changing that rate to the rate they should have had in the first place is enough to make the loan affordable to them now, then we are done. That should happen, no closing costs, not credit ding, nothing. Remember we are talking about the fixed rate, fully amortizing loan they should have gotten with their real data and the market rates at the time the loan was taken.”
“What if the rate they should have been offered back then isn’t enough? A mortgage is secured debt, so if you can’t pay, the item securing the loan has to be taken and sold to pay off the debt. If the loan was recourse, then you are responsible for any amount of the loan over and above the amount that was received for selling the house. So, you lose the house (once the bank finds the proper documents or goes through the state’s onerous requirements for foreclosing when the documents can’t be located - they all have them).”
“If you have a lot of money and a recourse loan, you have to pay any difference - people who have a lot of money (still) should have known better. If you have a lot of money and a non-recourse loan, you don’t have to pay the difference, but you do lose the house.”
“If you are broke and you have a recourse loan, I could see that fairness might dictate a slightly easier form of bankruptcy just for the purpose of dealing with the excess house loan. Do it the real way if you want to get rid of your credit card debt too. If you are broke and have a non-recourse loan, you don’t need a special bankruptcy to get rid of the excess house loan, so nothing special is required.”
“Now, what about the people who lived in the house for free for time well in excess of the expected time between defaulting and foreclosure. I’m inclined to dump most of this responsibility on the banks, but I can see an argument that the defaulter should have to pay rent on the time that they were living there and not paying the mortgage. I think this could use a lot more discussion.”
“And, finally, what should the borrowers ‘get’ for being the ‘victims’ of the banks. There are plenty of documented instances of the people helping with application inflating job titles, salaries, assets, etc. Perhaps they would not have gotten loans and gotten in trouble without that. Perhaps they would have. And if you signed the papers it is still your responsibility, but the problems were almost everywhere and I can see the need for something other than lose the house, go bankrupt if you need to, pay the back rent. What about this? They can get a new loan for the amount they would have qualified for using their original, documented information without closing costs and assuming they can still afford it. So the strawberry pickers with $35K combined income? They can qualify for a $70K mortgage, not a $700K one. Couple with $70K household income? They can get about $170K. Let them use a credit score calculated by excluding the mortgage payments they didn’t make. And maybe let them finance the back rent they owe as part of the new loan, so that even if they qualify for $x they would only get $x less the ‘rent’ they owe the bank.”
“So that is where I come out. You don’t get the house for free. You don’t get the loan cancelled. You lose the house. You maybe have to pay rent for the years you lived for free. And you qualify for a good loan at the level you would have qualified for using traditional metrics on the loan to income ratio back then assuming that you can still afford it.”
“I’m still not sure about this. I’ll have to think some more. Any other ideas?”
A reply, “All of these plans reward the idjits who participated. But if you were smart enough to walk away from the whole mess? No government cheese for you.”
“The whole mess was enabled by government laws/policies at all levels. Until that gets unwound, and government stops handing out carrots, while beating the crap out of some people with whup-azz sticks, nothing will have been gained, and the cycle will be repeated.”
Another said. “I greatly oppose all such plans. All such plans undermine the foundation of our legal system: Contracts. A contract already exists in each and every deadbeat case: The mortgage.”
“Once again, if these deadbeats had flipped their houses for even more sweet cash, they would have kept those gains or sunk them into even more outrageous risks (i.e. a bigger Garage Mahal), and nobody would have claimed anything was wrong or that some policy needed to change or anything like that (except us, the ‘doomsayers’). Fortunately for my sense of completion and justice, all of this became so huge that it was too big to bail without creating serious social consequences for the nation. All choices at this juncture will producing screaming agony for some sector, even the widest possible sector (the taxpayers).”
“A certain inevitability has entered the social future of the United States, and I welcome it. Bad behavior on this level deserves punishment.”
GS Fixer,
I changed your reply from:
‘government start handing out carrots, while beating the crap out of some people’
to:
‘government stops handing out carrots, while beating the crap out of some people’
I think this is what you meant. Let me know if it’s not.
Affirmative, sorry about my error
“A certain inevitability has entered the social future of the United States, and I welcome it. Bad behavior on this level deserves punishment.”
$urely yous je$t!!!!!!
You meanin’ this here type of “BAD BEHAVIOR$”?:
“Let our Sale$ team $how you how we can get you poors $imple folk$ to BUY a hou$e rather than throwing your HARD earned monie$ away on living with a “lord-of-the-land$”, we’ll get you a TAX deduction & get the Gov’t to “lend” a financial hand too! We’ll even toss in a Bar-b-q for all them backyard extended family partie$ you gonna wanna enjoy! Come right on in and have a $eat, really … it’s painle$$!”
Guys, how do you come out with this being a total refutation of contracts? The only mandatory contract modification I suggested was that if the person was put in a high interest subprime loan (originally) when they qualified for a regular one (originally) they should get a modification to the rate/loan type they qualified for then (not current ultra low ones).
I did not suggest principle write downs. I did not suggest everyone getting to refi to today’s rates no matter how underwater they are. I suggested people losing the house through foreclosure if they can’t afford it. I suggested that recourse loans be enforced against people who are not bankrupt.
The one real bene I suggested for the borrowers is that they get a chance at the loan they should have been offered in the first place - one commesurate with their income when they applied and even then only if they can qualify for it currently. Since that is the loan they should have been offered in the first place, I think that is a fair thing for the banks to do - and believe me, having to do all the work of underwriting each loan twice (using the old numbers and then confirming with the new numbers) is a very deserving punishment for the banks. We got into this mess largely because they stopped underwriting because they figured out a way to make a profit without making sure the loan was good. Making them underwrite twice for a bunch of loans would be a good lesson in how doing it right is more profitable than doing it over.
I’m not sure how you are all defining this as a major give away to anyone.
‘The only mandatory contract modification I suggested’
Yeah, but then Senator So and So will have his suggestion, etc. I don’t see how any of that gets done.
‘if the person was put in a high interest subprime loan (originally) when they qualified for a regular one (originally) they should get a modification to the rate/loan type they qualified for then (not current ultra low ones)’
How much staff would this take? Haven’t various govt programs been aimed at rate reduction? Most don’t apply and a lot of those that do end up in default again.
‘The one real bene I suggested for the borrowers is that they get a chance at the loan they should have been offered in the first place - one commesurate with their income when they applied and even then only if they can qualify for it currently.’
But what about the existing house with the existing loan? Are you saying that if they qualify for $170k, they keep the $250k house they bought? What happens to the difference?
‘We got into this mess largely because…’
Insert your favorite political/social demon here, because that’s what this has turned into.
I studied a little RE law in college. I was surprised at how logical it was. Something like 600 years of decisions, dealing with every imaginable situation. I went to a good school, and we were told at every level why each ruling was made. Fairness wasn’t the point, but rather a functioning property system. Crime and fraud are not a direct part of this sort of thing, even though there have always been crooks in real estate.
Bring on the prosecutors! It’s telling that that isn’t being done much. Instead the focus has been turning back the clock on a bunch of bad decisions, IMO.
“Bring on the prosecutors! It’s telling that that isn’t being done much. Instead the focus has been turning back the clock on a bunch of bad decisions, IMO.”
Which (if any) of the leading presidential candidates is likely to make reinstating a functioning rule of law in the financial sector a key policy objective? Or has Wall Street so effectively co-opted the political system that this is not even on the table?
Let’s consider what is fair. If a system isn’t generally fair, people won’t participate. Having ground rules is the way our system strives to achieve this.
There are other ways to do this; last night I recounted to a friend a long tale of a US family experience with property in Costa Rica. In short, they lost everything (no loans involved), and it was all legal under that system. If you ask a typical Costa Rican, they would likely insist this was the fair outcome.
There is going to come a day when the US govt isn’t backing all the loans. Will we want private investors to step back in? If they are treated poorly now, what rate of return will they demand for their participation? And what’s fair for the Florida teachers union that bought so many MBS?
I am reminded of what a guy south of the border told me once; that if you have so much that you can’t guard it all, you have too much. To him that was fair.
When will people not up outraged or frustrated such that they refuse to participate in the “democratic” process by which they have received the shaft-a-roo and that seems unfair.
The moral hazard angle(If someone faithfully paid on mortgage, then to see their neighbor get a principle reduction, and lose value on their property becuase of that)would make a lot of people mad. Others may get mad because they thought they qualified for relief from govt. programs like HAMP but didn’t; either because the bank lost their paperwork, or, how HAMP called for loanowners to be current, but the current settlement only applies to those who have missed two payments, are underwater, and have a bank held, non-bundled loan? What about those who never knew their loans were bundled, not held by BofA, and upon learning that their loans were sold down the river meant that they were too.
If people that were sold loans by Countrywide, and that a good many fell into “predatory lending”; how did BofA arrange that all loans that had been bundled fall outside the principle reduction settlement.
Also, what about the group of folks who have already been foreclosed upon; do they get anything (maybe 2k, but only if the loan had not been purchased by F&F)
F&F hold what, 60% of all loans in the USA, and they are all categorically exempt from this settlement? Because the banks don’t want to include them because it would cost too darned much? Or is it more complicated than that?
Seems unfair to me, the admin of these programs that supposedly will help out so many actually help so few. But to the banks, sure, it seems fair, and they control so many more assets than a single joe it just seems they get to throw their weight around.
So what seems fair therefore has to be good enough for everyone else? Also wonder why new settlement beneficiaries of the latest $25 billion settlement must be 2 months behind to qualify for settlement? They had to be current to qualify for HAMP.
It is such a mindboggling scene these days; thanks for this blog BTW.
The winners always insist the outcome was fair.
The losers always insist they were cheated.
“If they are treated poorly now, what rate of return will they demand for their participation?”
To me, this is the primary reason Uncle Sam should not meddle in private contracts. Let the borrowers and lenders work out the terms and have Big Brother stay out of it. Top-down government interference, in the form of cramdowns, increases the risk private mortgage investors face in providing loanable funds, which in turn reduces the private supply of loanable funds. Add to that taxpayer-funded government subsidies on F&F&FHA financing, and pretty soon you have a government-sponsored, too-big-yet-still-failed oligopoly mortgage finance system crowding out private mortgage lending entirely.
“Seems unfair to me, the admin of these programs that supposedly will help out so many actually help so few.”
I suspect that is the secret behind how (supposedly) writing down 200,000 hapless homeowners’ mortgages by an average of $100,000 a piece could add up to far less than $20bn in mortgage write downs.
“if you have so much that you can’t guard it all, you have too much”
Makes as much sense as, “there are more of us, so you better do as we say”‘ commonly known as democracy.
To me, this is the primary reason Uncle Sam should not meddle in private contracts.
Except, of course, to enforce them, no? Just have the gov show up with their guns, the private sector will show them where to point them. Or should we have Uncle Sam determine if the contracts are legit first? But then that would be interference, right?
Hmm, maybe it’s not so simple after all.
“Are you saying that if they qualify for $170k, they keep the $250k house they bought?’
Polly, this is a very fair question. What if they only qualified for $170K and used their hepped up loan for a $250K house? Do you make them pay $250K which they can clearly not afford?
Worse yet, what if they qualified for $170K, used a hepped-up loan to pay $250K, and now the house is back down to $170K? Do you let them stay in the same house with a brand-sanaking new loan, effectively rewarding them for their mistake with a cram-down while screwing every saver who waited it out?
I did not contemplate any principle reductions at all. If they got a $250K loan and could not really have afforded it then (if it was a level payment fully amortizing loan) or cannot afford it now (because of worse financial situation) then my theoretical system says there is no way to fix it. If you can’t afford it, you default, get foreclosed and (ignoring the whole rent scenario since no one has talked about it) if it was non-recourse you are done. If recourse, then you get sued for the difference and either pay it, or there might be a way to go partially bankrupt just for that extra part of the real estate loan.
I know that the differences between principle and interest are largely accounting and therefore human constructs, but I can’t get my head around principle reductions. I’m only advocating interest rate do-overs in cases where the bank put them in something like a 2% for six months/pick a payment/oops its 12% now when they qualified for a 7% fully amortizing loan. There is something about being that evil that gets to me.
Ben said: “Fairness wasn’t the point, but rather a functioning property system.”
By a realtor’s wagging tongue, that’s what I’ve been trying to say all along! All this do-over and re-write just undermines the legal system in the first place, pretty much making the USA a banana republic. It won’t just be a little fix action for a couple of years and then everything goes back to normal. What will happen instead (as is clearly happening now) is that instability starts to totally ruin all expected socio-economic outcomes in the nation. Imagine starting to have to make use of connections and bribes to get anything done. Imagine watching your money disappear from accounts, with no recourse. Imagine essentially living in Central America, where if you’re on the wrong side of the tracks, you really have no rights or hope, and neither do your children.
Our success stories are being exposed more and more as basic frauds, largely in the FIRE sector. Cheating, lying, bailouts, and all other sorts of privileges that lay clearly outside out body of law. There is only one goal at work, here: Individuals and organizations are pursuing the largest possible frauds since that protects them from law enforcement action. The bankers just settled the most recent accusations of fraud with a mere $25 billion payment that is not only a tiny fraction of the amount stolen, but is going to be largely covered from government fund sources anyway. In short, if you can go steal lawn mowers from Meijer’s all week, and then on Saturday a cop comes around and hands you a $5 ticket for your malfeasance, then there’s no conceivable future in which you won’t keep stealing lawn mowers. In fact, you’re likely to take on a partner to help you steal more (sounds like Europe’s banks working with the Fed, now, doesn’t it?).
There is only one goal at work, here: Individuals and organizations are pursuing the largest possible frauds since that protects them from law enforcement action.Google Wall Street’s Broken Windows for Bill Black’s most recent essay on just this subject. A sample: “In the lead up to the ongoing crisis we gutted the federal regulators, preempted the state regulators, and appointed anti-regulators to head the agencies.”
And yet we continue to create more regulations and laws, few of which will be followed. Fore they cannot be; there are far too many, and far too many individuals have been irreversably harmed by slapdash enforcement of those that do exist.
It has gotten to the point where entire blocks of laws are being enacted without the populace - including the extremely well educated - knowing the slightest bit about what these blocks of laws entail.
BetterRenter is very much correct. In fact, we’ve already arrived.
BetterRenter -
Thank you for some well-considered and structured posts as of late. I read them carefully, and IMO, you are very much on target.
I’m more convinced daily that our way out is ethics. I don’t know what law is anymore - it seems much of it has fallen to the moral relativism scourge that has overtaken our country. We now are largely directionless. Fewer and fewer people know what to do next due to real or imagined threat.
Threat to freedom, threat to family, threat to financial progress, threat to truth. Nearly everyone, rich or poor, black or white, young or old, whatever, feels this almost instinctively now.
It’s no way to live.
Sammy-
I read your post yeesterday regarding your decision to drop part of your moniker. Hopefully, that doesn’t mean you’ll stop posting here.
I’m convinced that decency and dignity will again prevail one day. IMO, they ultimately will serve as the only basis for course correction.
We’ve managed to severely damage the operations side of our country. The Constitution is the answer, as inconvenient as that document has become for a great many people from all walks of life, including the behind-the-scenes string pullers living from Connecticut to Maryland.
I’ve appreciation for the following toward an improved and strengthened awareness of decency, dignity and ethics in myself.
“Man, for all his ingenuity,
Has not yet devised a vow impossible to break.
He has developed law and conscience, even pride
As keepers of his sacred pledges.
And in his cunning,
He has found devices to mitigate each one.
So it is not to man’s institutions that we look.
It is not a church, nor a state which truly sanctifies,
But the deepest well of human need
The need to live united and complete
In a broken and imperfect world.”
Yeah, that’s it, we’re not ethical enough. There ought to be a law to force us to be ethical.
When I was young and naive, I used to believe the U.S. legal system existed to protect the ethical against unethical people who would otherwise routinely exploit them. Now that I am older and wiser, I realize the laws don’t work unless they are enforced, and that unethical people with lots of money are able to spend some of it to undermine the rule of law which would otherwise limit their ability to perpetrate crime unchecked by legal limits.
Oxide,
The fact that ethics cannot be regulated legally is precisely why ethics is so important. It’s why ethics ought to become a primary focus again.
It’s the lack of focus on decency, dignity and personal responsibility that has gotten us where we are today. It’s not the absence of laws.
Increasing the number of laws only enables those with the means to game the system to their advantage…a phenomenom that people here rail against daily.
Today’s laws clearly do not protect the innocent and the responsible. Our ethics now are so bad that we’re passing laws like it’s flavor-of-the-month time at Baskin-Robbins.
A great many people of today view passage of new laws as a direct threat to their freedom and livelihood.
There ought to be a law to force us to be ethical.
Already is one better known as “Interest Rate.”
A great many people of today view passage of new laws as a direct threat to their freedom and livelihood.
Especially people who are doing unethical things.
“Yeah, but then Senator So and So will have his suggestion, etc. I don’t see how any of that gets done.”
Oh, none of it will get done. This was a theoretical exercise. I can’t see anything this simple ever going through Congress. It isn’t do nothing enough for those that prefer to do nothing and it isn’t interventioninst enough for those that are caught up in “we have to DO something” land.
I’m ususally all about practical and what the law is currently. This is something totally different. I recognize some small responsibility to the borrowers who had no idea that banks had shifted their business model so much that they would lend you way more than you could possibly afford to pay back. People lived for decades and generations when banks wouldn’t even lend you money you could pay back. I find them a little less responsible for the mess than the financial engineers of the whole thing. I was wondering what it really would be reasonable to offer them. A loan of the size they could have afforded back then if properly underwritten (assuming they can still afford it) seemed like a possibility. I was looking for others.
“we have to DO something”
That thinking is the antithesis of good governance in my worldview. Yet any government official in a regulatory capacity who embraces the doctrine is likely to be blackballed by knee-jerk interventionists. Case in point: Notice how Romney changed his tune on mortgage intervention, since remarks in Las Vegas about letting the market bottom out met political opposition.
P.S. Despite how anti-government many Republicans in Congress or the potential future executive branch seem to be, I note that once elected, they become a part of the government they so despise. I don’t really understand why Republicans think this is such a great form of populism to embrace, as, Self-loathing seems detrimental to America’s future, and thus politically counter-productive. But I suppose many politicians will say anything they believe will increase their election prospects.
Wed Feb 01, 2012 at 08:42 AM PST
President Obama Slams Romney Over Foreclosure Remarks, Offers Re-Fi Plan
by TomPFollow
I like this.
You may remember Mitt Romney’s remarks last year that we need to foreclose and foreclose and let the market hit bottom:
Think Progress, Oct 18, 2011,
Romney Tells State With Country’s Highest Foreclosure Rate ‘Don’t Try And Stop The Foreclosure Process’
…
Gawd,
I hope it won’t be Sammy Sunnymood!
LOL, Robin.
“financial engineering”
Time to dump this intellectual construct into history’s dustbin of failed ideas?
“The one real bene I suggested for the borrowers is that they get a chance at the loan they should have been offered in the first place - one commensurate with their income when they applied and even then only if they can qualify for it currently.”
In regards to the rest of your post, everything seemed quite well reasoned, but basically takes the position that many of us have had since all this crap started. No freebies. Enforce the contracts. Eject the “deadbeats”.
And, although this seems like a “reasonable” compromise, I have one small problem. It assumes that the Lender shanghaied the Borrower and forced them into some bad loan deal. I would assume quite the contrary. I would bet that they WERE offered the reasonable loan with the higher payments, and higher down payment, and then given the OPTION of the deferred payment, load the back-side, higher interest rate, with no money down, it only cost $375 a month for the first year loan, etc.etc……………….and they AGREED to take the poorer loan (cheaper in the short run, more expensive over time), because like most people, they wanted the “easy way” out of high monthly payments. Naturally, the high rate of housing “appreciation” would make the payments for them. They could even take out a “cash out refit” for that new car and a swimming pool and vacation.
People who got crappy loans often took them because they saw them as an easy way to own a house with no sacrifice. How do you sort this out? I guess you need to put on the loan applications ANOTHER page of documents, just like when you rent a car and decline the insurance, that THESE ARE YOUR LOAN OPTIONS. CHECK ONE.
Then we can see how many people were “victimized” by lenders.
If the Borrower chose Option A. High interest, back-loaded, no money down, then we really, truly can say. THEY ARE NOT VICTIMS>
Please foreclose them NOW. Let them rent a trailer. So sad.
I like it. Except you spelled lose wrong. Its loose.
Hwy must be rubbing off on him!
I tend to loose track of English spelling rules over time…
Whose the looser?
I am speaking for my own area here but from what I witnessed for every victim, there are 10 deadbeats that did not care what the loan terms were…Just “Show Me The Money” baby…Thats all they cared about because they want what they want (Boats,Cars,Kitchens,etc.) NOW !..
It was a mania. Manias are driven by their own logic.
Many saw this as myself as a “set up” from the start. Sold in July 2005 San Diego house, five hundred thousand tax free and bought small farm in North West with balance in gold/silver bullion ready for the largest bubble yet–the debasement of the American dollar!
Many saw this as myself as a “set up” from the start ??
Well, if you did then you are better me and obviously better than most…Instead of the farm and precious metals you bought with your $500,000. you should ave just shorted all the lenders since you saw it coming…You’d be a Billionaire…
There’s no “set up”.
People have a tendency to attribute conspiracy to things that just basically happen by their own logic.
Nobody was “set up”. There were definitely drivers but there’s no “conspiracy”.
Manias happen, people get crazy, and life goes on.
Exactly. We loosened financial regulations, and the financial system went wild, then went bust- just like it used to do regularly before we had those regulations.
You can look for deeper, more esoteric or philosophical reasons, but Occam’s Razor says it was loosening financial regulations that led to the financial catastrophe. It’s the most simple, logical conclusion.
“Fair” would be for the majority in North America and Europe to see their standard of living crash to that of the rest of the world.
I’m not a big fan of fair.
I’d rather focus on solutions likely to have the best out come for us.
What’s the old expression ‘fair is where hogs go to be judged’
NICE.
“If the person was steered into a rate much higher than the rate they actually qualified for, that is a place where the bank should take a hit.”
Nobody put a gun to the borrowers’ head and forced them to pay above-market interest rates on the loan. If they thought they were getting hosed, they should have walked, rather than signing on the myriad dotted lines.
Foreclose ‘em all, let God sort ‘em out.
I am facing another year of moving and the rubber’s about to meet the road with regard to when and where my kids enter the school system. The irony, of course, is that I have every advantage in navigating the school system since I help run it and yet, I can’t overcome the geography barrier.
Pretty funny (read frustrating) since that’s what school choice is all about.
If the system was fair, I’d be having my choice of housing right now. But it’s not, and I am a renter that can’t keep up with the rising cost of everything.
This too shall pass, right?
It shall. Hang in there.
“Hang in there.”
I took my kids to the local ice rink to watch hockey and figure skating. My wife and I have decided that 2x/mo. we will have a special day where we experience something new as a family.
We were going to take kids for Thai, but our fav joint was slammed (damn spring breakers!)
I also need to take a deep breath — I can supplement my children’s K12 education, except maybe some math stuff.
Hmm… who here is good at math?
Try the Khan Academy - free online tutorials - I only wish I could get my kid more interested - some schools are adopting using the Khan Academy as an online resource.
If you moved your family to Poway, I could either help you or find someone to do it…
We all know you don’t have to catch the bottom of the bubble or the shoulder of the bull to have achieved our own personal financial goals and dive in when life demands it. Your kiddos will love the stability if you shop for your neighbors. You can’t be too careful with the neighbors. They say a lot about our happiness.
If the system was fair, I’d be having my choice of housing right now.
But fair is where hogs go to get judged, right? And look on the bright side- it gives you something to pin all your troubles on. ‘If only the gov wasn’t interfering, my life would be hunky-dory’.
An external enemy that causes all your problems- just what your psyche ordered.
Great, yup, that’s right.
Alpha is turning into quite the apologist for government-sponsored craziness, no?
FWIW, my monthly budget $900-$1100 puts me in competition with section 8 tenants.
Every effort should be made, right now, in getting people out of houses that f’ed up by CHOICE, and me and my family in. That sounds fair.
F O R E C L O S E
‘If the person was steered into a rate much higher than the rate they actually qualified for, that is a place where the bank should take a hit. If changing that rate to the rate they should have had in the first place is enough to make the loan affordable to them now, then we are done. That should happen, no closing costs, not credit ding, nothing. Remember we are talking about the fixed rate, fully amortizing loan they should have gotten with their real data and the market rates at the time the loan was taken.”
Nice fairy tale, but this is not how a free lending market with at-will agreements between borrower and lender, recorded on legal contracts, actually works. There was no obligation for borrowers to pay ‘above market’ interest rates, and no obligation for lenders to offer ‘market’ interest rates. Hence there is no legal scope for borrowers who signed agreements to pay higher rates than others to now claim they are somehow entitled to a better deal.
The whole post was meant to be a fairly tale. Thanks for noticing. An exercise in fairness, not law, but without the assumptions of the current fairness gang that fair means people get to stay in houses that they can’t possibly afford.
“The whole post was meant to be a fairly tale.”
Thanks for confirming my suspicions.
recorded on legal contracts,
You sure about that part?
I see no problem with settling that question case-by-case in courtrooms far outside the Beltway.