This is our regular update of current comments, articles, and news reports on strategic default.
This Business Week article and report by Brian Grow, Keith Epstein and Robert Berner is powerful stuff. Essentially, some insiders at the banks admit to the intentional delay in implementing strategies to stop the foreclosure crisis. This is somewhat of a behind the scenes look at the banks real resistance to mortgage loan modifications and principal reductions. Of course, the primary reason for resistance is nothing new: It can cost them a lot more money. Yet with a cadre of Washington lobbyists, moving in every congressional space, fighting against any effective foreclosure prevention legislation, it appears that the banks are having little problem achieving their goals. Add in the trillions of dollars in direct and indirect "bailout stimulus funds" given to the lenders. All you can hear is "Home Run!!".
Read more at How Banks Are Worsening the Foreclosure Crisis: How the banking industry is undermining efforts to keep people in their houses by Brian Grow, Keith Epstein and Robert Berner.
This next article is smart and concise. The writer, Sharon Secor, touches upon an important issue raised by strategic defaults. There is a double standard regarding who or what can use a strategic default. It seems that individuals and small businesses are discouraged from considering a strategic default while big government, big business, and big financial institutions can implement a strategic default at anytime. She correctly points out the hypocrisy of the government and big business. Some of my favorite quotes from her article are:
“John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the 'message' they will send to 'their family and their kids and their friends,'...on February 8, 2010, TheStreet.com announced that the Mortgage Bankers Association was 'forced into' a short sale of their headquarters, accepting '$41.3 million, a little more than half the $79 million the group originally financed in 2007.' "
"The message from top top is clear, only the little people, the average Americans on Main Street, are bound by mortgage obligation to keep paying on properties that have lost a significant portion of their value, when it no longer makes financial sense to do so and they can no longer afford the loan payment"
In reference to Goldman Sachs decision to pay large bonuses and payouts "[a] Goldman Sachs's top executive [Lord Griffiths of Fforestfach] expresses quite succinctly why Main Street should accept their lesser privilege...[by stating]...that the general public should 'tolerate the inequality as a way to achieve greater prosperity for all.'
We can expect to see socio-economic class "tensions" rise during this financial crises.
Read more at Strategic Default: Smart Business On Wall Street, But Unacceptable On Main Street? by Sharon Secor