So-called strategic defaults by homeowners have been a source of stealth stimulus. That is not really breaking news -- stories along those lines have been in print for several months. But the phenomenon doesn't cease to amaze...or outrage. So when a new story is published -- especially in the venerable New York Times -- we read it. In part to stay up on the trend. In part to see how high it can drive our blood pressure.
Today's dispatch in the Times comes under the headline "Owners Stop Paying Mortgages and Stop Fretting" and, from the start, it does not disappoint:
For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.
Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.
“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”
To be fair, the banks are apparently so busy with foreclosures that the process has been significantly lengthened. According to the story,
The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.
In essence, lenders are helping float the life rafts. In a sense, the borrowers cannot be faulted for grabbing hold. They are basically being incentivized to do so. At the same time, there is hanging on and there is hanging out. It would be one thing for people to take the gift they have been given and sock away money for a fresh start or the next time. It seems like something altogether different to go out for a steak or to the casino (or, in the now infamous rendering by The Wall Street Journal late last year, buying a season pass for Disneyland). As other commentators have pointed out, when the banks are painted as the bad guys, it is less difficult to feel moral compunction about spending the mortgage money elsewhere.
Perhaps this is good for the economy over the short run. But someone, of course, is going to pay -- namely, all borrowers in the future. It may not be a sign of the apocalypse. But neither is it one of our proudest moments.
