Ethics, Mortgages, and Evolution

The NY Times published this article yesterday that examines the ethos of our culture as it relates to homeowner’s who are confronting a home that is now worth less than their mortgage.  When I read it I began to think about how our social fabric has evolved along with financial markets.

Fifty years ago a homebuyer would take a mortgage from a local bank who would have then put the loan on their own balance sheet and lived with the consequences.  I can imagine that the homeowner had a greater incentive to stay current with payment even if property values declined because they probably did their banking at the same branch that they signed their mortgage papers.  Therefore, they’d have to confront the same bankers who would ultimately be negatively impacted by foreclosure.

Today, borrower’s can no longer identify the people who will be negatively impacted by their default.  Furthermore, mortgage note holders no longer have the same personal interaction with the people who owe them money.  Ever since the birth of securitization the mortgagee/ mortgagor relationship has become depersonalized.

I wonder what impact this has had on creating the current state of the mortgage and housing industry?  If you have some thoughts please leave them below.