Update: L.A. Land, 'Condoblue' on KPCC

A programming note, and a bit of self-promotion: I'll be a guest on the Patt Morrison show on KPCC radio today discussing the foreclosure crisis at roughly 1:20 p.m. local time. But here's the bigger news: Also on the program is Condoblue, the commenter here who set off a small firestorm by writing about walking away from a mortgage. Should be an interesting discussion.

Update: You can find a link to the audio about halfway down this page. Enjoy.

Comments

[Keith]

I hope you guys give the real story of the housing market. Even now, after so much has come to light, lazy journalists are letting phony experts give terrible advice to the public.

[TakeFive]

Here's the link to listen live

http://www.scpr.org/programs/pattmorrison/

See ya there

[TakeFive]

Good segment.

Condoblue/Karen came across as a reasonable person making a rational decision. Is she committing a lie of omission by purchasing her new home with the intent of defaulting on her current home? Perhaps. But being 200K underwater represents a debt that is virtually unpayable by anyone of average means. Should this lead to years of indebted servitude to 4 walls in a building?

The business ethicist perhaps voiced the lenders worst nightmare: That walking away is merely choosing to exercise one of the defined options in the contract. I believe he even chuckled a bit at the mention of morality in what is a straightforward business proposition.

[Cal]

Im still fuzzy on what went on when they filled out the mortgage application form and stated what they entered on the mortgage application under "Assets and Liabilities-> Schedule of real estate owned"

[Laura in L.A.]

Peter, you were great! I enjoyed listening to you (as I enjoy reading you!)-- you're a good speaker. I listened to the whole hour. Very interesting!

[Ace]

Cal, I am with you... there had to be fraud on that application somewhere. We'll see if the loan actually closes.

I missed the first 10 minutes of the segment but it was interesting. I wish they would have gotten a California lawyer... that guy from Washington was no help at all.

[Cal]

http://tinyurl.com/ywpegr

Just so people know where the real fraud may lie, on page 3 halfway down a person applying for a mortgage has to write down all the RE they own and then "enter S if sold, PS if pending sale or R if rental being held for income"

I wonder how condoblue filled out this whole section, if she left it blank its clearly fraud, if she filled it out erroneously it is fraud, and I dont exactly see a way to put in "im giving that one back to the bank" on the sheet.

[RadioManTodd]

BOOOOOOOOOOOOOOOOOOOOOOOOOOOO Real Player!

Anyone got a copy in some "standard" format like MP3, or WMV?

[silly goat]

RadioManTodd,

Download from the podcast. It's in MP3.

[Mousebender]

I'm not surprised that there would have been one or two people with the same opinion as Karen/Condoblue; for a few, this behavior has been as old as time--but not for so many people as it is now.

However, it is positively chilling to know that so many more people now have adopted this opinion than in past years.

Another thing: Morrison derides those who dare to criticize Karen as Calvinists. Morrison is either illogical or a provocateur. In fact, under this ersatz Calvinism, Karen/Condoblue is perfect. She is the one who seeks to maximize her net worth, and she sees herself as virtuous. Under her view, those of us who fulfill a contract as it was intended to be written are fools. Morrison has it backwards: People ought to scorn those who lie their way to riches, and have compassion for those who make every honest effort possible to fulfill their promises.

As for foreclosure being a valid fulfillment of the contract: if Karen/Condoblue's lenders wanted her condo just as much as her money, they would have bought condos in the first place and become landlords. They fulfilled the contract when they gave her $500K+ for the condo. Note that in her specific case, she claims no misunderstanding of the loan terms; she just seeks to saddle someone else with a loss of about $150K.

Ultimately, the problems are that (1) an increasing preponderance of people (of course, lenders as well as borrowers) are forgoing honesty in order to steal by misleading others, gaming the system, and repudiating promises, and (2) that our civil court system probably won't expand to force the swindlers and scammers to make their victims whole.

People everywhere ought to be honest. Failing that, perhaps in the future, mortgage lenders will demand large down payments and large risk premiums to compensate for this widespread lack of honesty--it's the only way that lending would make financial sense. Also, borrowers will slow down to read the fine print, and consult lawyers and consumer information before borrowing from a possible swindler.

[Cal]

Im still curious what they put under "Assets and Liabilities-> Schedule of real estate owned"

[Cal]

I had time to listen to the MP3 tonight, Karen is a bit amazing "Oh they are going to make me fill out a questionnaire and then I'd "

Karen definitely did the minimum possible to worry about keeping the place, the banks should definitely be worried if this becomes the consensus view because she is way beyond the normal walk away story. If people purely made housing a business decision housing locally would crash overnight, the "emotional premium" is extremely high in LA. It is high for the whole country as well but nothing like it is here.

It is funny that it was easier to fill out a loan application for a new place than fill out a form to keep the old one. If the path of least resistance is to get shiny new pad and let the lender keep the "albatross" (as karen put it) then the lenders are in a lot of trouble.

I thought your comments were excellent Peter.