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Wednesday, July 07, 2010

Comments

Jeff Sovern

Thanks, Brian. I also think the fact that many borrowers are underwater but still paying their mortgages undermines claims that the subprime crisis was caused solely by a decline in housing prices and not by a failure of consumer protection because it indicates that something other than a decline in home prices is needed before borrowers default--such as an affordable loan that should never have been made and that the borrower did not understand the terms of.

Brian

Jeff:
This is interesting -- and not terribly surprising. Its findings are consistent with the norms associated about consumer-business transactions generally. When a business defaults on a contract -- say, a pre-paid one-year subscription for a product or service -- because it has gone out of business, generally people don't think of the business as having done something morally wrong. But if the consumer defaults after receiving a product or service, it is often considered morally questionable (or worse), even if the reason is understandable (such as loss of a job).
Brian

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