Not long ago I received another interesting question related to our current economic hardships. A friend wondered if investing in Iraqi currency in anticipation of a steep devaluing of that currency was legitimate. I explained an important but often overlooked element of economics (which also touches on oil speculation and even ticket scalping)- the economic value of sharing risk. If I buy Iraqi denari at x and turn around and sell then at 10x I have not profited illegitimately but have shared in risk that provides genuine economic benefit to the whole Iraqi economy. (Of course I cannot cry if I sell x for a loss either.)
What has that to do with foreclosures? Possibly everything. First let’s cover the easy part. If you agreed, in taking a loan, to pay back that loan, you have an obligation to pay back that loan, whatever might have happened to the value of what you bought with the borrowed money. In this kind of situation that loaning institution is not sharing in the risk. They are simply supplying capitol and you are serving as the risk taker.
But suppose that the language of the loan agreement says something like this- you may either pay back the loan, or you may give the collateral/home back to the lending institution, and lose whatever money you might have put down. In this instance the bank is sharing in the risk of your investment. There is no shame in turning over the keys.Continue Reading on rcsprouljunior.blogspot.com