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Passing the Buck

With no end in sight to the sub-prime mortgage meltdown, hundreds of thousands of homeowners can no longer afford their mortgage payments. Every month we hear new reports detailing how many more Americans lost their homes. In the midst of this crisis, The New York Times recently published an article critical of mortgage lenders and how they are dealing with delinquent borrowers.

Many such borrowers have been trying to convince lenders to renegotiate their mortgage agreements. The article highlights the trouble that some borrowers face in trying to save their homes from foreclosure. According to the author, many lenders seem unwilling and uncooperative in accommodating these requests.

The author observes that, “While these companies maintain that they’re doing all they can to help imperiled borrowers, critics contend that homeowners routinely meet roadblocks.” Implicit in this statement, and assumed throughout the article, is the premise that lenders are morally obliged to modify the mortgages of borrowers who are unable to meet their contractual responsibilities. The question of whether or not lenders actually have a duty to assist these borrowers is simply not raised. Deborah Goldstein, executive vice president of the Center for Responsible Lending, makes it clear that such a duty is simply assumed: “We continue to rely on lenders to fix the problems they created by making reckless loans in the first place.”

The point is not that all lenders are completely blameless. Some lenders deserve blame for being less than prudent in making certain loans. But does this mean that such lenders wronged the delinquent borrowers, or that now they have an obligation to remedy these supposed wrongs by promptly modifying any and all mortgage agreements? In certain cases it may be in a lender’s interest to modify a mortgage, but is it obligatory for them to do so?

Not in the land of the free. The only source of such obligation would be the idea that lenders exist to serve borrowers, rather than to pursue their own interests. Lenders and borrowers enter into voluntary agreements because they each believe they will gain from the proposition. And they should only renegotiate their agreements if both parties see it as being beneficial to do so. Neither has a responsibility to be his brother’s keeper. In America, each of us is presumed to have the right to pursue our own happiness.