For a while now, I’ve been arguing that when it comes to lending, caveat mutuor should be a guiding principle. After all, no one held a gun to these guys heads and said, “Make me a shitty loan now!” And these guys were supposed to know how to assess housing loan risk–it’s what they do. Well, I would like to think people listen to me (although I’m sure I have nothing to do with it at all). But this NY Times article suggests that people are starting to do this:
The problem for me with foreclosures and people walking away from houses is the effect on the rest of us – our houses usually end up being worth less. The free market is helping the banks, with government help and with credit defaults swaps. The people walking away can save a years worth of mortgage payments by letting the foreclosure process go through.
I’m not sure what we could do but some smart people might be helpful.