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Moral hazard and the "rules are rules" crowd.
Seriously
flewellyn
So, foreclosures. They're happening a lot, a lot more than they should, and for bad reasons. We all know this.

I came upon this story here, in which a group of Occupy Atlanta people set up camp on the lawn of a police officer whose home is being foreclosed upon, to try and block the eviction. I applaud this move and any like it. But, it seems, the commenters were not all of the same mind.

I noted a number of posters complaining about this as somehow immoral, allowing people to "live in homes they haven't paid for" or something like that. Two things I have to say in response.

First, we know that the banks have been engaging in widespread fraudulent foreclosures. We know that the banks have engaged in fraudulent mortgage lending, and fraudulent securitizing of known high-risk mortgages. Given this fact, ANY foreclosure in today's economic and regulatory circumstances is highly suspect. So, why do they want to blame the victims, instead of the perpetrators? I suspect the "just world" fallacy, but I can't entirely rule out less savory mindsets.

Second, it is in society's best interests to keep people in their homes. Foreclosure should be a last resort, not a routine action, and loan modification, restructuring, payment assistance, even forgiveness of debt in extreme hardship are all preferable and very supportable actions by the banks, or by the government. Kicking people out of their homes and disrupting their lives is bad for society at large, and constitutes a much greater moral hazard than "letting" people "get away with" not repaying the full mortgage, if they are truly unable.

So, in closing, I say that this moralizing about "rules are rules" and "how dare someone get away with this" is entirely misguided. Contracts are not the highest moral law, and in fact, it is often necessary to abrogate them, and to forgive debts, when the social and economic landscape has become too unbalanced. The mentality that those less fortunate who need help are "getting away with" anything is highly immoral.

Very true. Whenever I see people going on about how "these people should have read the contracts and known what they were getting into", I want to sit them down in front of that incredible stack of legal boilerplate and demand that they spend hours of their life reading it, and even more hours trying to understand it, when someone convincing is just telling them they have to sign on the dotted line and everything will be taken care of. Now throw in the excitement of being able to buy a home of your own when you never thought you'd be able to, and the heady environment of lots of other people doing the same. Was it a smart and rational decision on the part of these people to sign contracts for subpar loans? No, it wasn't, but it also wasn't a smart and rational environment, and the banks actively perpetrated that as a means to make more money.

You also bring up an excellent point about the harm to society done by forcing people out of their homes - "foreclosure ghost towns" and the rise in crime associated with them come to mind. Unfortunately, a lot of people (especially when they're scared or angry) stop thinking about anything outside of themselves, and can't understand that going "why won't everyone else be just like meeeee?" isn't going to solve any of the world's social ills.

I tend to agree with YOU-- but I seem to be in a distinct minority, since people apparently are so wrapped up in not letting other people get benefits they don't get they can't see the bigger picture.

So thank you for posting this.

The "rules are rules" people tend to relax that stance when they are the ones suffering from the rules.

I have never believed one size fits all when it comes to the rules. There are often extenuating circumstances, and it is moral and just to take those circumstances into consideration.

Oh, certainly. But I have a couple of other thoughts on that idea, too.

First off, rules are meant to benefit society as a whole. When their application does harm, they need to change.

But also, I note that the "rules are rules" crowd doesn't seem very interested in holding the banks to account for their massive, flagrant violation of the rules against fraud.

We've never been in danger of foreclosure... unless it's bee really fraudulent.

However: we've lived in our house for over 25 years. We've re-financed a couple of times.

And- we've had SERIOUS PROBLEMS doing that, because the banks have been so careless about titles that even when we went to refinance through the same out fit that currently ad our mortgage... they were reluctant because there was not a clear title.

In theory, we have that settled; we paid an extra few thousand dollars that supposedly resolved this. However, I fully expect that when we go to sell our house, the title problems will show up again.

And- we've already paid several thousand dollars to supposedly get this resolved. But- that does not seem to be possible given the widespread fraud on the part of the banks.

And when I read about banks forclosing on hgouses thgat they not only do not have title to, but that have been entirely paid off...! Well. Talk about fraud!

Indeed! But the "rules are rules/moral hazard" crowd will of course think that it's all your fault.

"Just world" means never having to say you're wrong, it seems.