Sorry, does the fact that someone is "underwater" somehow negate the fact that they took out money to pay for a house? Are loan balances based on home values instead of home prices all of the sudden?
Again, what kind of world do you think we live in? You seem to imagine this idealist fantacy world in which everybody has equal information and bargaining power. The market was artificially inflated by banks and by the government, and the only ones being forced to carry the burden are the poor, working Americans, and homeowners. For some reason you are defending the very banks that caused this mess, suggesting that homeowners, after being completely screwed by them, now morally owe them something and ought to keep paying them even if they are severely underwater. The contract was based on a house of cards built by wall street and now those who own homes suffer the consequences--but not your beloved banks.
Sure a home is a home, in a very superficial sense of the word. But things are not that superficial. First, a home is also equity, and people buy homes--and have been encouraged to do so all century--not only to have a place to live, but because it's a relatively secure investement; for most middle class Americans, their home is their biggest asset, and the biggest determination of their wealth, and its value often effects their economic decisions for the rest of their lives. A home is also one means of economic security for the middle class. Second, you are ignoring a myriad of circumstances, say if somebody loses a job and needs to move, or if somebody has children and outgrows a 1 bedroom condo or 2 bedroom home, or if somebody gets a job transfer, etc. Being "underwater" is not benign. And being 20% to 30% underwater is crippling.
You also forget that most of those suffering right now are not those who took out ARM's. They are average homeowners who put money down at a flat rate. They were not speculators. They wanted to start a life, in what typically would be a good investment. They did not create the shaky world in which the housing market became a precarious bubble that would benefit the super rich at the expense of responsible honest working Americans. Indeed, you are correct, homeowners anticipated that their homes would most likely rise in value as they had for the past 60 plus years. Little did they know Wall Street was creating a huge historical bubble on the backs of American workers that would shake the foundation of the economy and drop hosuing prices by 15% nation wide, on average. Again what kind of world do you think we live in, because I'm a bit baffled as to how benign you seem to describe the circumstances in which people bought homes over the past 6 years. Forgive me, but you sound like the guy who blames the woman for walking into an a dark ally after she gets raped--"she should have known better, she took a risk--got what she deserved!"
Your ability to pay back a loan absolutely SHOULD be the deciding factor in whether or not someone lends to you, particularly high value loans like a mortgage. It's absolute nonsense to suggest otherwise.
Agreed. I just don't think credit scores are necessarily indicative of people's capacity and willinglness to pay their dues. For instance, people who typically have good credit, and try to pay everything on time, now will have terrible credit after the econimc collapse, because of lost jobs, foreclosure, etc. Credit scores ignore all of this. It's just a number that disregards circumstances--human life is not reducible to calculations.
How are you "held hostage" by your credit score?
I mean this metaphorically. The point is that credit scores effect a big part of peoples economic life: their ability to find work, get needed loans, get insurance, etc. Thus the threat of bad credit keeps people in precarious situations. The point is that credit scores are used by those in power to to exploit working Americans and keep them in line. Take, as another example, the credit card industry: they thrive off of those with "bad credit"--in fact they depend on them. They know they will not be able to afford payments, and so they sing their siren songs to these people in vary vulnerable positions, and attempt to capitalize off their economic problems.
Truth lives, in fact, for the most part on a credit system. Our thoughts and beliefs 'pass,' so long as nothing challenges them, just as banknotes pass so long as nobody refuses them.
--William James