In the midst of all the current commotion about foreclosures — can foreclosures be avoided because of loan documentation defects? will the government step in to stem the tide? — just a word of caution. Remember that if lenders do not believe they have rational and reliable means within the legal system to enforce their collection rights, then they very quickly cease being lenders. Sure, it may sound great to some borrowers that the day of reckoning is deferred. But what does that mean really? Can a system where lenders lend and borrowers do not repay really be desirable? Or sustainable?

As the owner of a business with debts, and as, for that matter, a person with a home mortgage, I have learned one thing: Life gets a lot less complicated if you simply accept that you are going to repay your debts. Not to overlook the very real hardship now for people who lacked the personal judgment to avoid overleveraging on a house at the height of the bubble, but c’mon: If you can carry the mortgage, do so; if you can’t, let the bank take back the house. You’re only losing what you never woulda coulda shoulda had in the first place.

I final word. Right out of college, I was a banker for a couple of years. (Hated, hated, HATED it, by the way.) I remember the bank president addressing the young recruits thusly: “You are all excited to begin your careers as lenders. I am here to change that. Lending is easy. Your career will be only as successful as you are in collecting the loans you’ve already made.” Wise man.

Advertisements