Change of heart.

It’s funny how a person can change. Almost two years ago I wrote an article titled “Have you no morals“. The article centered around a quote from The Motley Fool (a popular financial website). Here’s the blurb that really pissed me off….

For many of the underwater homeowners in today’s market, paying down their mortgage isn’t really in their best financial interest. Particularly in states like Arizona — where mortgages are nonrecourse, meaning the lender can’t go after any of the homeowner’s assets other than the property itself — it makes little sense to continue paying a large mortgage on a devalued house when comparable rental rates are far below the monthly mortgage payment.

I was heated after reading The Motley Fool’s article. I went on to say things like…

“So you may be $100K underwater on your house. But if you can still afford the mortgage, you have every MORAL obligation to keep paying.”

and

“Sure it may not be illegal to walk away, but that doesn’t mean it’s the right thing to do. Remember, when you purchase a home, you VOLUNTARILY accept the risk that comes with it.

It was one of my more popular articles receiving just shy of 70 comments. While there were definitely some that didn’t agree with my opinion on the matter, many backed me up. But now, two years later, I’m realizing that I was wrong, and so is everyone that sided with me.

There really is nothing immoral about skipping out on your house payment. I failed to acknowledge that when you sign a mortgage contract you are doing just that…signing a contract. You aren’t promising the bank you are going to pay them all the money you borrowed. Instead you are agreeing to a deal that is mutually beneficial. It looks like this.

You and bank both agree that if you pay back the mortgage on time every month, you will eventually become the sole owner of the house.

You and the bank also acknowledge that you may stop paying your mortgage at any time. And If that happens, the bank gets to kick you out of the house and ruin your credit.

It’s really that simple. I was naive for thinking people had a moral obligation to pay the banks, because let’s be honest, no mortgage contract says “I will pay you every month as long as I have the means to do so.” If it did, then we could make a morality argument, but since that’s not the case, morality has no place in this discussion.

When you borrow money from a friend, you typically promise to pay them back. When you borrow money for a house, you don’t make that promise, you simply say let me borrow the money and if I don’t pay you back, feel free to kick me out and damage my credit. Period. End of story.

….OR IS IT????….

So I started the article saying I believed people who could afford to pay their mortgages had a moral obligation to do so. I then spent the last two minutes trying to convince you that is not actually true, and that morality is irrelevant. But let me spin it one more time and once and for all declare that you MIGHT in fact have a moral obligation to pay your mortgage back if able.

For the following reason…

Although you don’t have a moral obligation to the bank, you do have a moral obligation to look out for your fellow man. Once the banks were deemed “to big to fail” and were bailed out by the fed, we the people became involuntarily investors in your loan. You should pay your mortgage bill so I don’t have to. Don’t know if I can call you immoral for not doing so, but I’m pretty sure I can at least say “You kinda suck.”

Reader questions:

Do you think homeowners have a moral obligation to the bank? Why or Why not? If you said yes, you’re wrong.

Do you think homeowners have a moral obligation to their neighbors and the stability of America? Debate in the comments.

 

p.s. if you don’t get the cartoon today, see this article.

57 thoughts on “Change of heart.

  1. No.

    To say that people have a moral obligation to repay lenders is like saying that someone who leaves a casino with more than they came with has a moral obligation to make sure they walk out with less. Just because the casino is supposed to take 1-10% of every dime you wager doesn’t mean they should always get that amount.

    The banks bet on housing. They lost. We act as though banks hadn’t agreed to take on the risk associated with mortgages. Clearly, banks knew that downside risk existed, otherwise they’d never require PMI.

    Also, the taxpayer isn’t on the hook for any operations at the Federal Reserve. People who hold dollars are, however, but that’s a different topic for a different day. (Taxpayers actually benefit from the FED operations, since the US government now spends less to service the debt today than they had in 2008, when the total debt was actually smaller.)

  2. “Do you think homeowners have a moral obligation to their neighbors and the stability of America?”

    Absolutely you do. Thus, you should walk away from your home sooner so the bank can take it over more quickly and re-sell it in order to more quickly stabilize our housing market and economy. Further, banks should be aggressively foreclosing on delinquent homeowners who are clearly violating the terms of their contract with the bank. All of these delays of the inevitable are simply slowing the US recovery and are highly immoral.

    • I agree. The state of Nevada just passed some stupid law to make it harder for banks to foreclose. The delay adds much more uncertainty here in Las Vegas.

  3. “You do have a moral obligation to look out for your fellow man.”

    By helping destroy the too-big-to-fail, fee-hungry banks, you are helping your fellow man.

    If your mortgage is owned by a credit union/small local bank, then I would agree.

    • But what about your obligation to your neighbor? I’m not talking about “your neighbor” in a philosophical sense; I’m talking about your actual neighbor. The poor slob who’s paying his mortgage and finds himself surrounded by homes that are in foreclosure, thus devaluing his own home. You don’t just hurt a big, fee-hungry bank when you walk away from your mortgage. You hurt the guy who is mowing his lawn ten feet away.

  4. There was an article in the globe and mail the other day which linked to a tale about how a financial planner lost his house. In it he examines exactly what you are talking about-how he felt he had a moral obligation to pay the bank, when in reality he didn’t. The paragraph he wrote is:

    ‘He proceeded to explain that I didn’t have a moral obligation to the bank. I had a moral obligation to my family. I had a contractual obligation to the bank, along with a clear moral obligation to be honest in my dealings. What he was asking was this: Which is more important? Your contractual obligation to the bank or your obligation to your family to preserve your ability to make a living? I had never thought of it that way. But it made sense. I summed it up to myself like this: I have a contractual obligation to the bank (as well as a moral obligation not to skirt the consequences of breaking it: losing my house and wrecking my credit score). But my moral obligation to my family trumps the contractual obligation to the bank. ‘
    It’s an interesting read: http://www.nytimes.com/2011/11/09/business/how-a-financial-pro-lost-his-house.html?_r=1&pagewanted=1

    My favourite quote of the article though was a bumper sticker he read, which was ‘Honk if I’m paying your mortgage’.

  5. You do not have a moral obligation to the bank, or your neighbors, to pay off a mortgage. As you noted in your aticle, you are signing a contract. As a business transaction, and this is how you need to look at it, the bank is loaning you money with an interest rate to make more money. The homeowner is using leverage to purchase something that would not otherwise be able to afford outright (yes, some can but the vast majority cannot). As AMD @ amomsdime pointed out via the linked article, you have a MORAL obligation to your family, but a CONTRACTUAL obligation to a bank/credit union.

    That being said…things would run a lot more smoothly if people made better choices when purchasing a home and banks made better choices when making loans…

    • I still blame the banks for the whole problem because they ultimately had all the power to deny a loan to someone who clearly could not afford it. The banks along with the entire real estate industry were so greedy for the commisions, they would all lie, cheat, and steal. Who is the immoral one now?

      • The people that signed up for loans they knew they couldn’t afford. The people that lied or embellished their income/assets to qualify for a larger mortgage. The immorality worked both ways during the housing boom unfortunately.

        • I hear you, but ultimately it was the banks who had to do the due dilligence to vet the people who applied for the loan. Just because I tell you that I’m trustworthy doesn’t mean you should give me money. Although when I was shopping for a house during the boom years, banks were climbing all over each other to sell me a loan even though I knew I couldn’t afford it.

          • That is akin to saying the McDonald’s employee has an obligation to prevent obesity by adjusting your order.

            The responsibility ultimately falls on the consumer, for better or worse.

  6. When you have a contract – you are bound to fulfill the contract. If you walk away from a mortgage and leave the home in sellable shape – you have fulfilled the contract as the penalty is clearly defined in the contract. Only if you trash the Property or try to use the legal system to stave off the consequences of default are you in moral breach. In the end it’s just business – not a morality play.

  7. The banks were at fault for the mortgage crash. They are the reason my house was devalued to the tune of $70,000. They failed their end of the bargain. It is simply an economic decision. The house is no longer a solid investment. I can’t rent it to cover my mortgage. I can’t sell it to receive even my money back. I need to move for work. Goodbye house. This whole “Moral obligation to my fellow man” is a farse that ended when the housing crash came. The banks got a bailout- but that did not help me. Good post! Fun conversation. I know I am in the minority but the american religion that says “Pay your mortgage or make baby Jesus cry” is a farse.

  8. America is a melting pot with differing levels of morality at all levels from the individual to the town to the corporation. What may be moral for you is a contract to someone else. It is what it is and won’t be changing any time soon.

  9. Ninja, how long will it take me to convince you that the stock market is a Ponzi scheme? 🙂 Hopefully you will pull your money out before others leave you holding the worthless bag of retirement statements.

  10. Full disclosure: we short sold our house 2 years ago. It was the hardest decision we have ever had to make. Besides losing our home, losing all the money and work we put into it, our credit being in the gutter and our credit card being cancelled the worst thing about it is just feeling like an idiot every time we say “we short sold out house”. I don’t mind sharing our story or talking about it, in hopes that it might help someone else make a better choice, but it is still a rotten feeling having that in our financial past. That said, it was the right move for our family and it was done out of financial necessity not just the fact that our house depreciated in value by 50% in 10 months.

  11. Sorry dude, but you’ve overthought this to the point where you are wrong. Surely you understand that suffering the consequences of your actions doesn’t make them moral. That’s like saying:

    You and I both agree that you may eventually live a long life and die of old age.

    You and I also acknowledge that I can kill you at any time. And If that happens, the police will arrest me, I will go to jail for about 40 years, and pretty much everyone in the world will hate me.

    Does that sound like a fair deal to you? Would my killing you be moral if I were willing to go to jail and face public ridicule? Of course not. Being willing to accept the consequences of your actions doesn’t make those actions morally justified. It means your desire to be immoral outweighs the possible consequences.

    The bank doesn’t want to repossess your house and ruin your credit. This isn’t a win-win situation for them. If you don’t pay, they will take the house (most likely losing a lot of money on the deal) and ruin your credit (to punish you for going back on the deal), but they don’t want that; they want you to pay what you agreed to pay.

    • Wrong. When you buy a house both parties agree to the deal. When you kill me, I don’t agree to that deal. I can’t even say more about this because murder and a mortgage aren’t even close to related.

      Do I have a moral obligation to pay my renters insurance every month? Nope. If I don’t pay it they cancel my service. That’s what the agreed upon deal is…BY BOTH PARTIES. This is no different than a mortgage payment, just more terms and greater consequences.

      p.s. remember mortgage insurance often helps mitigate the risk even further for the lender

      • You’re missing the point. You act like the existence of a clause in the event of a default means the bank wants that to happen. That’s not true.

        My car insurance has a clause that they will fix my car if I wreck it. Does that mean it is moral for me to intentionally wreck my car if it would be financially beneficial to me?

        Here’s another truly parallel situation: I lend you $100 because you want to buy a set of lawn gnomes. If you don’t pay me back, I’ll come over and take the lawn gnomes out of your yard (even though I don’t want the stupid lawn gnomes). I’ll also tell everyone I know that you’re a jerk and you aren’t a responsible person to lend money to.

        Is it morally justified for you to decide not to pay me back, just because there is a clause in our agreement that I can have your stupid lawn gnomes and talk bad about you when you stop paying? Of course not. I don’t want either of those things; I just want the $100 you said you were going to pay me.

        If I wanted lawn gnomes, I would have bought them myself. If the bank wanted your house, they would have bought it themselves.

        It’s very simple. When you take money from someone and tell them you will pay them back, if you do not pay them back then you’ve stolen their money. I don’t see the gray area.

        • That’s because there is no gray area. You don’t tell the bank you’ll pay them back, you tell them you will make payments. There’s a difference.

          I don’t like that people are walking away from their homes, especially when it is affecting the economy like it has, but I can’t pretend homeowners have a moral obligation to the bank, when they don’t. That said, they might have a moral obligation to the economic well being of America .

          Would you say someone that lost their job and couldn’t afford their mortgage anymore is immoral for not paying it? I’m guessing you would say No. So now what you are doing is deciding who does and doesn’t have a moral obligation to the bank? That sounds pretty “gray” to me.

          The reality is no one has a moral obligation to the loan, only a contractual one.

          p.s. remember the majority of states are recourse states, so it’s not like all people are getting to walk away from the remaining balance.

          • Yes I do think it’s immoral to say “well, I made a promise, but now fulfilling that promise is hard, so I’m not going to do it.” Morality doesn’t get thrown out the window when it’s inconvenient.

            If you lose your job, find a new one. Work with the bank to restructure the loan and payments while your income is down. Figure out a way to make it happen. Hardship doesn’t give you the moral right to go back on your word. Anything less than doing everything you can to pay someone back for the money they lent you is, in my opinion, immoral.

          • I both agree & disagree with Ninja on this point.

            You do only have a contractual obligation to pay back the bank. As you pointed out, both parties sign a contract = contractual obligation.

            However, I think it is your moral obligation is to keep your contractual obligations. So it is not a moral obligation to the bank/loan, it is a moral obligation to yourself to behave in the manner that you said you would when you entered into the contractual obligation.

          • No, actually you do tell them you will pay them back when you sign the mortgage. For example, from this sample mortgage document:

            http://www.clronline.org/resources/app/MortgageSampleMortgage.pdf

            The Borrower agrees that if all or any part of its interest in the Property is sold, transferred, mortgaged or otherwise conveyed, voluntarily or involuntarily, either while the Borrower is living or upon the death of the Borrower, or the Property ceases for any other reason to be the Borrower’s principal place of residence this act shall be a default and Borrower shall repay the Lender (unless the Lender otherwise agrees in writing not to require repayment) the full amount of the outstanding indebtedness under the [Note][Subsidy]…

            and

            Should any default be made in the payment of any amount due under, or in the performance of any covenant of, this Mortgage then all sums due hereunder shall, at the option of the Lender, without notice, become immediately payable thereafter, although the period above limited for the payment thereof may not have expired, anything to the contrary notwithstanding, and any failure to exercise such option shall not constitute a waiver of the right to exercise the same at any other time with respect to the same default or any subsequent default.

            Are you telling me that if you signed that contract, you don’t feel like you’ve committed to paying back every dollar you were lent?

        • You and the bank would be fools to loan out the money in the first place. You and the banks created this mess and good luck trying to fix it. Actually, the banks will get bailed out and you will be the proud owner of lawn gnomes.

          • This isn’t a question of whether the loans were smart business decisions. This is a question of whether it is moral to take money from someone and promise to pay them back, and then decide not to.

            Were the banks stupid to make those loans? Yes. Were they forced to make some of them by the government? Yes. But the business decisions behind the origination of a loan is irrelevant to the morality of paying your debts.

          • I’m gonna call BS on Kevin. You seem to be twisting yourself into knots trying to blame the big bad government for all the country’s ills. Dude, the government didn’t “force” banks to make bad loans. Did they give them the incentive to? Yes. They also give me an incentive to have ton’s of children in the form of tax incentives, do I plan to have 10 kids? Hell no. Being encouraged to do something doesn’t absolve you of responsibility when you do it horribly wrong.

            I’d love to know if you are also up in arms about health insurance companies finding loopholes in contracts that allow them to cancel peoples insurance when they make a claim. Don’t they have a “moral” obligation to fulfill their contact rather than using clauses in the contract to get out of it? Business are after all “People” with a moral duty to society right?

          • Kevin- you keep saying “promise”. Show me a mortgage contract that says “I promise to pay my loan back.” If you can do that, I will concede, but you and I both know you wont be able to. You gotta stop trying to make the mortgage contract something it isn’t.

            I think about it like this. I am in a lease until April 2012, but if I got a dream job in Texas next week, I would have no moral qualms about breaking my lease to take the new job. I would have to pay the lease termination fee (two months rent) since that is what I agreed to, but it hardly makes me immoral for taking the new job.

          • “You aren’t promising the bank you are going to pay them all the money you borrowed.”
            “You don’t tell the bank you’ll pay them back, you tell them you will make payments.”
            “Show me a mortgage contract that says ‘I promise to pay my loan back.’”

            I know I’m considered an “antagonist” around these parts now, but I can’t let this pass. Here is the relevant clause from my own (adjustable) mortgage; I would be surprised if it is atypical:

            “You will make monthly payments of principal and interest in the amount of $xxx for the first 12 months. In subsequent years, you will make monthly payments of principal and interest in an amount to repay all principal and interest based upon any adjustments in the interest rate. All monthly payments will be due on the first day of each month until you have paid all principal and interest you may owe the Bank for this loan.”

            Without getting into whether this is a contractual or moral obligation, it is not like a service contract that either party may terminate at will. It is an explicit obligation to repay the entire balance of a loan.

        • If you didn’t want the gnomes you shouldn’t have made the damn loan! The banks were willing to make loans because they believed homes would hold value, and were therefore an acceptable risk. Your analogy doesn’t float.

          • Are you telling me your credit card company has an interest in owning everything you buy on that credit card? That’s absurd. When someone lends you money to buy something, it’s because YOU want it, not because the lender wants it.

          • No, thats why they charge interest of 14-25% based on credit worthiness. You also can’t walk away from consumer debt unless you declare bankruptcy. You can walk away from a home because the bank agreed to take your house instead of charging higher interest. I never said the bank wants to OWN houses, but they will risk ending up with one because it has value to them as an asset they can turn around and sell. If you don’t think you can sell the gnomes if the guy defaults you shouldn’t make the loan and you definitely shouldn’t write it into the contract that he can give you the gnomes if he fails to pay you back.

            You honestly don’t see the flaw in your argument? And your supposed to be a PF guy?

  12. Thank goodness you came to your senses. My opinion all along has been that the banks screwed us, so screw them. The banks were supposed to act as gatekeepers, keeping all those who could obviously not repay ‘exotic’ loans out of the housing market (hardly anyone could repay those loans on such crazy terms btw, ergo the housing crisis). The banks engineered a collapse. They allowed people like me to be influenced by real estate agents and ‘loan officers’ into buying a house I could not afford. I paid the price. I also paid a $4000/month mortgage payment for as long as I could before it adjusted again into the $5000 realm and, at that point, I bummed some months without paying the mortgage, moved out and let it foreclose. But I want to point out that I lost THOUSANDS of dollars including a sizable downpayment. Unfortunately, I didn’t take that 100% mortgage.

    As far as my neighbors go, not my problem. Most of them lost their houses too anyway so it didn’t matter. Hold the banks responsible for the entire housing mess because they are the ones who created it. In the end, I have a family to take care of and I figure we’re all better off letting the housing market collapse and starting over in homes that we can ALL afford. The banks are behaving now the way they should’ve all along. Refinancing is taking months to accomplish. I feel ZERO regret at walking away because the whole housing bubble was the result of fraud and greed that trickled down from Wall Street to the neighborhood bank on your street.

    • I’m not sure if it’s just the greed on Wall Street that led to this mess… I’ve had personal experience with individuals in my neighborhood who got licensed as real estate agents or mortgage brokers because it was a cash cow and they thought they could get rich. As long as they sold, they could buy the cars, watches, vacations they wanted. In a sense, a get rich quick scheme sold on late night infomercials. You’re breathing? You can become a real estate agent and make thousands of dollars for very little work!

    • I take your point. But home buyers needs to take responsibility as well. I think both sides were at fault and both sides had a lot to gain by ignoring the facts in plain site. The lenders ignored the fact that borrowers were a bad credit risk and the borrowers ignored the fact that they damn well knew that if the slightest thing went wrong with their budget or finances that they would almost instantly not be able to pay back the loan.

      There is a difference between walking away because you have to and because you want to.

  13. Ah, how wonderful our world would be if business involved morals. Maybe then the banks would’ve felt it was their moral obligation to their customers and the American public to research the people who were applying for these mortgages and not just rubber stamping them through. Maybe Lehman and co would have realized their moral obligation NOT to bet against their craptastic mortgages thus preventing the recession from which we’re “recovering.”

    So, I think that no, you do not have a moral obligation to pay your mortgage because you’ve gotta look out for number one, as everyone else in the situation did. You will be punished and maybe someone else will get to buy your house at a discount so you could be helping your fellow citizen.

    Plus, the major banks are still too big to fail. The government stepped in to help the banks and still hasn’t completed their “moral obligation” to us in order to protect us from this ever happening again.

  14. I think the obligation to your fellow man goes beyond the fact that the banks have been bailed out. The bank isn’t just renting the property to you, They bought the house for you with the understanding that you would buy it from them over time, while you are using the property. When you walk away from the deal, they not only lose monthly income, but they lose money equal to the remainder of the mortgage minus what they can sell it for. Basically what was your loss becomes their loss. The “Screw the Big Banks” mentality is one that I share, in part, except that the bank will attempt to make up for the new shortfall that has come up because people can’t or won’t pay their mortgages. That means higher fees, lower interest rates on savings accounts, and more punitive practices for every other customer involved with the bank.

    • Honest question: Have you ever read a mortgage? Because you don’t seem to have any comprehension of what a mortgage agreement consists of.

      • Actually, having read through the 30 some pages of my mortgage contract, this is the gist of it. As a homebuyer unable to front the cash to buy the home, you ask the bank to buy it on your behalf. As incentive to do so, they will charge you for the privilege of using their money to buy what you want. Like a credit card on steroids. Their reward for tying up their money for your purchase is the promise of future income (interest on the loan amount). The cool part? It’s not like layaway where you don’t get to use the item before you finish paying for it. The bank knows there is risk in loaning to you (but they forgot that when they made all those risky loans and/or they assumed the government would bail them out to keep the money moving) and have appropriate penalties in the agreement you both sign (foreclosure, trash your credit rating) should you decide you do not want to pay (thus chopping out their future income).

  15. *sigh* I remember the good ol’ days when standing behind your word when you made a committment meant something…
    My two cents? Yes, it sucks that the bank can make foolish decisions to lend money to people who can’t afford the payments then get bailed out (thus removing the risk of making stupid decisions). Yes, it sucks that people’s hopes and desires weren’t fulfilled when they purchased their home (quick income turn around, owning a bigger home than they thought they could afford, at the short end of the stick when their neighbors walked away from their mortgages).
    I think what it boils down to are those internal moral compasses we all have. We each make our own decisions guided by the little twinges in our guts which tell us based on our personal situations what is right and what is wrong. My moral compass is different from your moral compass.
    I personally feel it is wrong to enter into a contract then not fulfil the contract (whether or not there is a penalty looming over me). If I didn’t want a contract I would save up the cash and buy the item outright. You may not feel that way. But we get to have different opinions. Will I still form an opinion based on your actions? Absolutely. But it’s just my opinion, not fact. If I feel like alienating someone by telling them they suck for walking away from their mortgage, that’s my loss to the other positive contributions the relationship may have.

  16. Does anyone really think that underwater home”owners” continuing to make their mortgage payments had any impact whatsoever on whether or not the banks repaid the bailout loans?

  17. I think that once you sign a contract saying that you will pay ‘x’ amount of dollars for ‘x’ amount of months, yes, you are obligated to continue doing so. The value of the home at any later point is irrelevant. You agreed on a purchase price.

  18. I think that if you knowingly and willingly incur debt of ANY kind (be it mortgage, consumer, what have you), you ARE morally obligated to repay that money. You can’t play dumb and say durrrrrr. You knew what you were doing when you acquired the debt. What’s NOT right is the way interest charges work.

  19. For me, this says it all:

    Romans 13:7, “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed.”

    That is why I personally feel a moral/ethical/lifestyle/etc. obligation to repay my debts….. I owe it, so I should pay it.

  20. Very interest topic! Thanks for posting. My 2 cents for what its worth. My gut tells me that a man should pay his debts, plain and simple. To be frank, I simply wouldn’t have the balls to buy a home (or anything that expensive for that matter) with zero down and enter into a capital structure with 100% debt and no equity to purchase an asset so illiquid given the harsh consequences associated with failure.

    HOWEVER!

    A mortgage is a secured loan, granted by lenders that are in the business of “pricing risk”, meaning that lenders are “in theory” skilled at estimating the proper amount of fees/interest that should be charged, and holding a security interest in enough collateral (a house) so that if the proverbial ‘sh*t hits the fan’, the lender can recover close to 100% of principal. The bottomline is that the lenders completely failed at their job, which is to make sure they are collateralized by an asset with actual value and to charge the right fees/interest to cover their risk that the proceeds from the sale of the collateral will not be enough to cover the losses in the event of a default. The loan is also effectively guaranteed by the individual(s) borrowing the money from the lender, meaning if the house is not worth 100% of the loan balance upon default, the borrower has to pony-up the difference.

    In that respect, a mortgage is 100% a business transaction and the lenders made a “business decision” to charge low interest, require little or no equity, no complete proper background checks, due diligence and verify income. The business decision was made to lower credit standards to increase sales. Basically, the lenders failed to perform basic credit analysis of any kind and relied on a simple thesis that housing prices always go up, year after year.

    With that in mind, if the borrower can’t pay and has no assets and then simple turns over the keys and the property in good working condition to the lender, who am I to judge the borrower on a moral level? It might just be one of the most rational business and financial decision this person ever made.

    • I think the rub is that there were people who were ABLE to pay and decided not to because they owed more than the house is worth. In that case, the banks would have done their due diligence and correctly identified someone who is able to keep up with payments, but when the house lost value, the borrower did not think it was worth it to continue paying.

  21. You have no obligation to pay your mortgage. A mortgage is a financial contract. If you fail to pay, for whatever reason, the lender has a right to have the house. That’s the deal that both you AND the lender signed up for – no morals involved.

    Of course, someone may choose not to lend you money in the future because of your behavior, but that has nothing to do with morals either.

  22. As an Arizona homeowner I am constantly yelling “F You!!!!” at my friends and neighbors. I bought what was supposed to be a starter home in 2003, it wasn’t necessarily the house I wanted but it was what I could afford. Now I am making $10 more an hour and can afford more home but I can’t get rid of my place because I’m $80,000 upside down. I’ve been told to just walk away because I will never get my money back, but at what cost? I wouldn’t be able to get financed for another home and I would just have to rent a smaller home or apartment for the same price as my mortgage. It wouldn’t have been so bad if I hadn’t refinanced in 2005. I orginially had an ARM and went in to get a fixed rate and my home value had skyrocketed so like a dummy I took out some equity (stupid, stupid, stupid). I still signed the papers and am responsible for the consequences.

    I have many friends that in the past few years have just walked away from their homes, they still can get a new home because their significant other was renting before they moved in together.

    I’m just mad that I did everything the right way and am being screwed by everyone else that bought more house they could afford and they get the bailouts and the newer house.

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