Wednesday, Oct. 22, 2008|This is upsetting to see real estate professionals trying to suppress market information. One of the biggest contributing factors to this housing bubble was a lack of transparency and information asymmetry. Robert Shiller makes a great case for this in his new book, “The Subprime Solution.” I’m sure Professor Piggington is going to go off on this one soon, so my comments are probably irrelevant.

It would be criminal in my mind if a particular borrower were able to reduce their principal amount by several hundred thousand dollars without the marketing being able to take that into consideration when assessing the value of a home in a particular market. The argument for keeping this information secret is the argument for continuing to artificially inflate housing prices. The music has stopped. It’s time for the people without chairs to rent an apartment that they can afford, repair their credit and save actual cash for a down payment next time. Maybe stop working that second job to cover your ridiculous mortgage and spend more time with your kids. You’ll definitely feel richer.

The other troubling aspect of this whole idea is that my partners and I, who have mortgages on properties that exceed their value but can still service the debt, are now being incentivized to hand the keys back. We’re not so much concerned about our credit because we principally invest in commercial property where lenders lend against the asset, not the sponsor. We had a long conversation about this last night. If everyone on our street is getting bailed out because of hubris or stupidity or they were hoodwinked by a slimy broker, why would we keep picking up the slack out of some sense of Victorian propriety for paying what you owe?

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