Proselytizing cold-ass reason.

http://www.huffingtonpost.ca/2015/07/28/shadow-mortgage-market-canada_n_7882216.html?utm_hp_ref=canada

Key quote :

As indebted as she is, she can’t bear to part with the home that means so much to her elderly mother. She would do anything to keep the place her father built when her parents got married.

The author reveals the bias right there. It’s so emotional, heartbreaking, but it’s also so irrational. If you want to see entitlement, there you go, it’s not the prima donna, it’s messier than that. I know full well that most people would respond to this statement with a sense that there is something wrong with a system that “puts” people like Juanita into this horrible situation. But lets not forget, she is sitting on an asset that she refuses to sell, she has some financial means, but chooses not to utilize them. Maybe out of desperation, but people act like they have no choices. Which is certainly not true here.

People in Canada really do believe they have a ‘right’ to own a home, which, while they do have that freedom, it is not the same kind of capital-R Right that guarantees her personal safety, or ability to speak her mind.

I hate that this is happening. It is a tragedy. It is tragic that there are people so financially illiterate they use the services of the jewellery guy. And I  also hate the way that people will paint this guy as a sleaze-ball…I mean, he sorta is, but he is also 100% not wrong. He forces nobody, he doesn’t feel bad, doesn’t care, and it isn’t his place to care. People make choices, emotional choices, that get them into these financial straits. The Huff post author would like to frame it as No choice at all. But there is a clear choice, sell or don’t. There isn’t any victimization in this loan market. Not the way this story reads. But it feels like it. Right there in the prose.

Hey, remember Shylock? Merchant of Venice? People that charge interest are not morally fallible because they charge interest, sorry. They provide all of the information about what will happen if payments are not made. Whose job is it to make sure someone understands the risk they are taking or not? Grey area. Who is able to judge if someone understands? Not easy. How much would that cost? A lot. Buyer beware, no? Consumers have agency, and we really should keep it that way. 

All this to gloss over that the author identifies some troubling incentives in the loan market. There is a problem that occurs if everyone is out for themselves here.

Although alternative lenders are not insured by the CMHC, mortgages in Canada are considered “full recourse” loans, which means the borrower is responsible for repaying a loan even in the case of foreclosure, unlike in the United States.

That means lenders can take legal action to recover the money owed. It is also why many alternative lenders are often not the primary lender but will help finance second, third or even fourth mortgages. They are willing to provide loans to borrowers with just five per cent equity in their homes.

Unlike banks and credit unions, which rely on deposits from other customers for capital, shadow lenders finance loans with money from groups of investors. Some experts worry that such lenders, who earn their money in fees from investors but take on little risk themselves, could be more inclined to dole out bad loans that are likely to default. A growing contingent of market watchers is calling for better monitoring and regulation of shadow banking activities.

So the market maybe doesn’t have a good price mechanism on risk or ‘risk premium’, there is potential market failure there. Which is a public goods problem, and the government is probably the correct body to address that. No doubt. Good to report on that. But again, the author’s bias would likely be that the people that go for these loans are not responsible for the repercussions. Because this is a victim piece. “Full recourse” is scarty, it means that rich people can sue and bleed poor people. Power imbalance. Truth be told, the rich people can do that because the poor people agree to it, they agree to it so they can keep their stuff. When they agree to a loan, they transfer the Right to own their stuff to someone else…so it’s a case of ignorance. If they want to keep their house, no matter what, they shouldn’t leverage it.

For some reason, we have this narrative in the west, or whatever universe we wish to define, in which the ignorant are innocent because of their ignorance. Ignorance is tragic, and in some way excusable, because: “how to not be ignorant?”. But we shy away from assigning ignorance the blame it rightly holds. I can attempt to theorize why, but I assume it has to do with fear. We fear our own ignorance, and so we are careful to avoid addressing it in others as a mutual way of saving face. The reason we have to save face is that we are petty and judgemental to one another in the first place. Which is partly because we are so egotistical, narcissistic, and obsessed with advancing our own rank in society ( ironically we do this also by amassing wealth in material objects). So ignorance lives and thrives. So we have tragedy. So some wish to protect the ignorant from their own ignorance, disincentivising self education, perpetuating tragedy. It’s the tragedy of good intentions, or maybe it’s the tragedy of narcissism, or cowardice, or all of the above. Let’s not make this simple. Remember Shylock? These problems’ve been around a while. 

The Juanita story is there to say what? “Hey, it’s not fair that some people get to own homes and some people don’t.”

 

It’s not fair. Or, perhaps, it is exactly the most fair it is possible to be, because to do anything else would be to say that Juanita is entitled to somebody else’s property. Or at least to say Juanita is entitled to someone else’s precious effort and time and focus…scarce resources. And in a free society, you can’t really force anyone to give up scarce resources just because someone needs them. Yet someone should, right? So the government should fix it. But that’s taxation, and quite literally means someone is giving up their property for Juanita, so she can keep hers. In truth, she could sell her house, rent, and have money to help her in that situation…but the author doesn’t criticize her for being irrationally attached to some romanticised asset.

Her dad built it, I get it, it really would be a shame to have to give it up, but it’s still just a possession, a material possession. And what matters more in all of this is that she is making this sacrifice for her mother, to ease the burden of illness on her family. She is taking a shitty loan to manage her finances. 

 

What message is the author really getting at? That she should keep her home, and that the system is wrong if it ‘puts’ people in these desperate situation. And on that note, I think I agree. Aren’t we supposed to have universal health care in Canada? Isn’t Juanita’s story better to point out the inadequacies of that system? After all, as a country, we did decide that health is a capital R: Right. I totally find her story sympathetic.

And at the same time, if it isn’t the healthcare system that failed her, is she really blameless? Sometimes medicine is hard to swallow. She should sell her house. That is the rational way forward from a financial perspective given the information the reporter provided.

 

There is a reason people hate the Huffington post, but actually, it’s great. They report on things that everyone is else neglecting. You just have to see that they miss the point, they are lazy thinkers. They know something is wrong, they just don’t know what.