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> succumbing to the ethical and moralistic brainwashing Ugh. "brainwashing"? A bankruptcy for a low- or middle income earner would be much more disruptive than

> succumbing to the ethical and moralistic brainwashing Ugh. "brainwashing"? A bankruptcy for a low- or middle income earner would be much more disruptive than it would be to a high-income earner. Your opinion (or how I am reading it) is elitist at the very least.

tptacek 12y ago
No, he's saying that high-income people appear to be worse credit risks because they're educated and know that they don't have to "go down with the ship" of untenable debt loads, while low-income people tend to do exactly that; in other words, he's saying it's not a good thing (for the homeowners) that Clayton's low-income home borrowers are better credit risks, but rather a "tell" that Clayton is exploiting those low-income people.
- skybrian 12y ago
  Another possibility is that a higher income means you don't really need credit if you start over, so this is just rational self interest on both sides. But that's just another hypothesis. I don't think the truth can be found with armchair reasoning; it requires data.
  - meztez 12y ago
    Credit score is independent of income level. The score we use in our insurance risk modeling doesn't care about the amount of money you earn. There is a lot of actuarial papers just demonstrating this. Credit score is often though of something reflecting wealth. It is not the case. It is a score that reflects the likelyness of you defaulting on future obligations.
    - reitzensteinm 12y ago
      What parent is saying is that if you have a high income level, it's not the end of the world to pay cash for everything, so you can live with a bad credit score. You might have to buy a beater while you save for a nice car, but if your income is low the equivalent option is taking the bus.
rdtsc 12y ago
> A bankruptcy for a low- or middle income earner would be much more disruptive than it would be to a high-income earner It would be. But I am saying even if even they wouldn't, the higher income earner will have less moral and ethical qualms about walking away. In other words they would do the math and seeing that their million dollar home is under water, they would throw the keys at the bank and walk away. While perhaps someone raised and believing in hard work, paying your debts, being fair and responsible, would actually feel like they are letting the bank down or they are violating some core ethical principles, and might lose sleep over it.
- darkstar999 12y ago
  That makes sense. But "succumbing to the ethical and moralistic brainwashing" makes it sound like you think it's ethically and morally justified to walk away from a loan.
  - science4sail 12y ago
    I imagine that he/she is looking at it from the perspective of the high-income person. In that case, defaulting is no more evil than losing money in the stock market or having one's business perform badly this quarter. Sure, the financial impact may be painful, but all parties involved should have been aware of the risks of making the loan.
  - deleted 12y ago
    [deleted]
- guelo 12y ago
  I have anecdotal evidence of this from the recent housing bust. One friend who's worth several million walked away from a $700k mortgage when he realized how upside down it was. Another friend who's worth less than $100k stuck with a $300k loan and even doubled down, sunk in her entire life savings to refinance and reduce the ballooning payments. Despite my pleading her reasoning was a moralistic attitude of "I gave my word". The friend that walked away recently bought a new house and is doing better than ever financially while my other friend will be feeling the pain for years.

tptacek 12y ago

No, he's saying that high-income people appear to be worse credit risks because they're educated and know that they don't have to "go down with the ship" of untenable debt loads, while low-income people tend to do exactly that; in other words, he's saying it's not a good thing (for the homeowners) that Clayton's low-income home borrowers are better credit risks, but rather a "tell" that Clayton is exploiting those low-income people.

skybrian 12y ago
Another possibility is that a higher income means you don't really need credit if you start over, so this is just rational self interest on both sides. But that's just another hypothesis. I don't think the truth can be found with armchair reasoning; it requires data.
- meztez 12y ago
  Credit score is independent of income level. The score we use in our insurance risk modeling doesn't care about the amount of money you earn. There is a lot of actuarial papers just demonstrating this. Credit score is often though of something reflecting wealth. It is not the case. It is a score that reflects the likelyness of you defaulting on future obligations.
  - reitzensteinm 12y ago
    What parent is saying is that if you have a high income level, it's not the end of the world to pay cash for everything, so you can live with a bad credit score. You might have to buy a beater while you save for a nice car, but if your income is low the equivalent option is taking the bus.

rdtsc 12y ago

> A bankruptcy for a low- or middle income earner would be much more disruptive than it would be to a high-income earner It would be. But I am saying even if even they wouldn't, the higher income earner will have less moral and ethical qualms about walking away. In other words they would do the math and seeing that their million dollar home is under water, they would throw the keys at the bank and walk away. While perhaps someone raised and believing in hard work, paying your debts, being fair and responsible, would actually feel like they are letting the bank down or they are violating some core ethical principles, and might lose sleep over it.

darkstar999 12y ago
That makes sense. But "succumbing to the ethical and moralistic brainwashing" makes it sound like you think it's ethically and morally justified to walk away from a loan.
- science4sail 12y ago
  I imagine that he/she is looking at it from the perspective of the high-income person. In that case, defaulting is no more evil than losing money in the stock market or having one's business perform badly this quarter. Sure, the financial impact may be painful, but all parties involved should have been aware of the risks of making the loan.
- deleted 12y ago
  [deleted]
guelo 12y ago
I have anecdotal evidence of this from the recent housing bust. One friend who's worth several million walked away from a $700k mortgage when he realized how upside down it was. Another friend who's worth less than $100k stuck with a $300k loan and even doubled down, sunk in her entire life savings to refinance and reduce the ballooning payments. Despite my pleading her reasoning was a moralistic attitude of "I gave my word". The friend that walked away recently bought a new house and is doing better than ever financially while my other friend will be feeling the pain for years.