I'll start radical and come closer to the moderate middle, I think.
The idea of a bank taking away someone's house, I suggest, is an utterly radical, inhumane and bad idea. Who came up with it, Mr. Potter?
It immediately puts money before health, education, children's and family well-being. It mis-prioritizes the values we want our children to have: People and environment first, profits later.
The current system sets society up for the cost of sheltering a family that's been evicted. The bank ends up with thousands of houses and yet they're not in the real estate business and have no interest in it.
The loss reported on their books is declarable and deductible. And the bank was literally given the money in the first place anyway: it didn't cost them anything but a few keystrokes on a keyboard. The evicted families are now out on the streets, huddled up in a parent's house or apartment, or a friend's, church's or a municipal shelter. The children have to go to school, they have to have a place to which to come home, to have dinner, to sit to do their homework and some place for a family to gather and be a family. The likelihood of abuse of children is so increased when there is not a stable home.
A home, as well all know, is not a house, but can occupy a house. If a bank takes away a house which is a family's home, they have torn at the very fabric of our society: the family, where children are fed, nurtured, educated, loved and cared for. If children don't have the nest experience, the probability of being an unhappy, possibly unbalanced adult is not a certainty, no, but it's increased. A family home is the fundamental structure of our society. When it is threatened, in short, so is our society. This is how important it is for banks to help families stay in their homes, even during financially difficult periods. We need to change our minds about this whole enterprise and to humanize.
Of course a bank needs to make money, and of course, people who borrow are obligated to pay it back. This is not the question at hand. The question is: what is the most effective way to assist a borrower to make good on a loan if they are having some difficulty in making the payments?
Our current system threatens the borrower (I am avoiding the word mortgagor, obviously based on the word "mortgage" which means, from the French, "dead pledge". Can we not do better than to conjure this idea when borrowing money to establish a family home?! I trust we can.)
Even though the economy collapsed in September, 2008, based on years of the sub-prime lending practices, credit default swaps, bundling mortgages (dead pledges), selling them to foreign banks and betting against them (isn't that, or shouldn't it be illegal?) and designing mathematically-insane derivatives, just in the month of October, 2011, foreclosures rose 7% three years later. Banks, having gotten bailed out to the tune of trillions by the American taxpayer, are evicting the very same taxpayer who bailed them out.
Are any marbles left? The psychology of this kind of business or legal structure indicates that bankers who perpetuate this are sheep not leaders, and that leaders in this domain would humanize the system with humane priorities and ethics, not digits and spreadsheets. Both hemispheres of the brain need to be working, not just one!
In the current set-up, and it is a set-up, what we're really looking at is a model of doing business that is punitive instead of cooperative and this is why a lot of our society is unraveling and falling apart. It's like a patriarchal father whipping a child into submission for what is perceived as bad behavior.
Except in this case, we're all adults, yet the whipping, in one form or another, continues, though by a different name, usually involving money.
The Nobel Prize for Peace laureate, Dr. Mohammed Yunus, in his development of the micro-credit program of the Grameen Bank, has a different philosophy, a humane one and probably more profitable, loan-by-loan. It doesn't punish its late-paying borrowers for some original sin, but instead meets with them, inquires into their life circumstances, and seeks to support and counsel them to help them get back to being able to start paying the loan again. Through a nurturing, caring attitude, through some guidance, counsel and patience, a 97% loan payback has been realized through these means. Compare that to any bank in the U.S. and you will see which system works. And there are virtually no foreclosures.
I'm suggesting that the idea of "mortgage" be done away with altogether, as not one of us wants to engage in a "dead pledge". Socially-attentive, conscious lending should take its place, so that the lender holds values of understanding, compassion, support and offers counsel. It is a game-changer and there is real-world proof that it works. If it works in Bangladesh, in can certainly work here, after all, a family is a family, and the heart of humanity reaches into all. It's time to waken the heart of the banker to this reality as well.
To concretely change our currently broken system, I recommend an immediate moratorium on all foreclosures, President Obama, and that foreclosure be virtually removed as an option, except as the very last alternative when over a few years, the borrower has continued to fail to meet their obligations, even after much support, time and counsel, yet w if done as the exception, it is done cooperatively, not punitively, humanely and with regret.
Many foreclosures are affected even when they've been robo-signed and the holder of the Note cannot be identified rendering numerous, possibly the majority of foreclosures actually illegal. Has that stopped judges from reversing the process? Occasionally.
Remove foreclosure as an outcome of non-payment as above, and an entirely fresh vision of borrower-lender relationship is put in place, now as cooperating partners, as in a business deal, because that's really what it is.
Families stay in their homes, children stay in school, the cost to society to pick up the cost of the family's shelter is eliminated, neighborhoods don't go downhill because the houses are occupied, people feel more secure and can perform better at work and in school, and we continue to build a better healthier, happier, more stable society. The value of the real estate is steadied and increases, it doesn't decrease. Neighborhoods continue to thrive.
Banks still get paid albeit, possibly in some cases slower, but their payback rate would be, if Grameen is any example, a lot better than at present. And the bank can avoid also becoming, by default rather than by plan, realtors.
Everyone wins, the Occupy Movement has moved into Occupy Your Home, and the banking industry would take one step closer to the ideal brought forth by Jimmy Stewart in It's a Wonderful Life.
This proposal is realistic because it is sensible, humane, kind and has a sound economic base, locally and systemically, whereas the current system is just one we've grown accustomed to but doesn't work. It's inhumane and honestly nothing short of greed-based, self-interested only and repugnant. This is what has gotten us into the current dilemma we're in.
Let's take the opportunity to move into the new paradigm of socially-conscious lending, and with this little attitude change, we'll change everything. Interestingly, being socially-conscious ends up to be economically advantageous.