Two Wrongs Don't Make It Right

Two Wrongs Don't Make It Right

This is Dean Hartman, who is another blogger from the financial industry with his strong opinion on the current foreclosure mess.

This is just my less-than-humble opinion, intended to spark some dialogue.

A common scenario: People default on their mortgage (that's wrong) and the bank is compelled to foreclose to protect the interests of their shareholders. During the process of foreclosing, the bank makes a technical mistake, or worse, the bank representative alters or forges a signature on a document to facilitate the foreclosure action (that too is wrong). That's two wrongs. But, are they equally wrong?

I know that every circumstance is unique, but in an era of strategic defaults, doesn't it seem that all this conversation is missing the point? Borrowers borrowed money of their own free will and they didn't (or couldn't) live up to their agreement to pay it back under mutually-agreed to terms. These borrowers received Good Faith Estimates and Truth-In-Lending Disclosures. They received Commitments, explaining the terms. They went to a closing where things were explained and documented for a third time. So the "I didn't know what I was getting into" argument appears a bit fragile. The bottom line is that they didn't make their payments. Why should they not be kicked out of their homes? Because of a clerical error?

It doesn't seem right to me. It's not fair. What many fail to see is that where banks ARE big financial institutions who received bail out money to survive, the banks are owned by shareholders who are people too. And the shareholders of the banks, lived up to their end of the agreement. They showed up at a closing table and delivered money. They only expected the agreed to repayment. But now, in many cases, they are being asked for concessions. Be it principal reductions or extended terms or lowering of interest rates, one side of this contract we call a mortgage is making concessions, while the other is using legal technicalities, to steal even more from the lender.
Delaying foreclosures hurts the lender and its shareholders. It makes our financial structure as a nation weaker. It continues to erode confidence in our economic future.

The only ones profiting from this are the ones who didn't pay their mortgages and.the lawyers. Why do they deserve this? Lawyers are not out to help the recovery; they are out to line their own pockets. I doubt many of them even care about helping their clients because, in many cases, they are doing more damage than good to their long term credit and the nation's economic recovery. (Their personal economic recovery is doing just fine.)

So, I agree that the lenders should not be altering and forging documents, but why is that violation of people's morality worse than not repaying the loan? Why should the individual who owns shares of stock in a bank suffer more than the defaulting borrower? And why does our legal system reward the lawyer for prolonging the eventual agony?

A better future can only begin when all the inventory is absorbed back into the hands of people who will pay the loans back. Until then, prices will continue down, confidence will continue to wane, the lawyers will be richer, and the banks will need more federal money. (Remember, the taxpayer ALWAYS winds up footing the bill.) It's just my opinion. Let the comments begin.