Is "walking away" from a mortgage wrong?

Yes. It's breach of contract.

Nicely done spinoff

I will say this until the day I die. There is nothing "wrong" with walking away from a mortgage. There is no moral component here at all.

A mortgage doesn't say, "pay or you're a bad person". It says "pay or we'll take your collateral".

Whether a person sells the house for less than they owe, or transfers ownership through a foreclosure or dees in lieu, it's the same effect. Borrower defaults, and a portion of the balance is written off. This is what happens in bankruptcy and no one is saying bankruptcy is "wrong".

As I said in the other thread I understand the reasons people walk away and would be tempted myself were I in that situation. I would also have a very hard time living with myself and sleeping at night knowing I walked away from an obligation. The only way I would walk away was if I could not afford the note I signed anymore.

quote:

---

Why should a consumer reciprocate if the other side shows no moral obligation to them?

---

And what moral obligation would that be?

quote:

---

There are farmers who filed bankruptcy in the early 80's who are still pariahs. And rightly so.

---

Why should they still be pariahs?

If they moved to another town, no one would even know about the bankruptcies. They don't even show on their credit anymore.

No. Not at all.

It's a business transaction and it is the responsibility of the bank to underwrite appropriately for the risks. Bankruptcy is basically a put option on the loan and that information is known up front by the bank.

FYI, I'm an underwriter (not retail).

When the bank lends me money at LIBOR, I will start feeling a moral obligation to repay.

Banks are just credit arbitrage machines. If you don't default, you are actually getting screwed, as you have subsidized the defaults of others.

quote:

---

It says "pay or we'll take your collateral".

---

And in full recourse states, after it says the above it also says, "And if the collateral is sold for less than the loan value, we will then pursue all legal means to collect the difference from you."

The vast majority of U.S. states are full recourse states, btw.

I don't consider walking away from a loan as a "moral" thing. "Moral" connotes a religious based concept. I don't think it is religious.

But to me, it is a business ethics issue.

quote:

---

A mortgage is a loan, not some magical entitlement bestowed upon the masses by Jesus.

---

Profound

quote:

---

Its an agreement to pay later what you could not pay now

---

Enlightening

quote:

---

In most cases, people will live 6-12 months in a property pending forclosure withouth making a single payment. I'll suppose you would be of the opinion that the lender owed them that time

---

You think the debt holder is doing this out of courtesy?

quote:

---

Grow up

---

Again Big picture...you don't see it.

quote:

---

LSUAfro

---

Alright, I yeild. I agree that we need to get people back into the economy any way we can right now. But I'm fearful of the moral hazard walking away creates.