Legal contracts aren’t about your ‘word’. He didn’t take an oath when the bank agreed to give him a mortgage. He followed the contract which has a failure to maintain payments clause just like all bank contracts do. There is nothing moral or immoral about it. It is just a legal flowchart of possible outcomes and he picked the one that the bank thought would always benefit themselves just like every other contingency written by the bank into the mortgage contract. It turned out not to be the case in some circumstances but that isn’t the fault of the borrower. Again, banks can and will use their contracts against borrowers when it benefits them. It would be stupid to be playing the game with different sets of rules and moral expectations for the different parties involved.
Could be they’re just taking a cue from the mortgage bankers themselves:
http://www.boston.com/realestate/news/blogs/renow/2010/02/after_years_of.html
Who was forced? Didn’t he spend hours voluntarily filling out loads of forms?
My understanding is that a signature has about the same legal standing as an oath. Maybe I’m mistaken.
If that clause is phrased in “business as usual” terms, then you have a good point. But if it is referred to as a “penalty for breach of contract”, that’s a whole different ball game. See my post #36 above.
‘Forced’ in the sense of endowing the person with some false sense of moral obligation.
All this talk or moral obligations…how is it moral for the person to throw money away at this house, and then end up not able to pay for kid’s college? Or for chrissake retire until they’re 70 because they weren’t able to save?
There’s nothing moral about ruining the rest of your life because you signed a contract with a bank.
Unless Dave Ramsey says that Jesus says so. In which case Dave Ramsey can take flying fuck.
Yep, but forms provided by a bank who thought they were getting a good deal without doing their homework. And after all, isn’t it their job to do their homework on counterpary risk?
If it were a business-to-business transaction and one side defaulted, no one would say there was a moral duty.
Commerce is dog-eat-dog. Just because it’s a citizen on one end of the transaction doesn’t magically give the counter-party moral protection from strategic default.
Is any of that the bank’s fault?
If you do believe that it is the bank’s fault, then go sue them. And many people are doing exactly that, for exactly that reason. And I sympathize with them, and I do wish them success in their search for justice.
But if it is NOT the bank’s fault, then … Well, I’m going to keep quiet to prevent this thread from being moved over to GD. So let’s try to stay focused on facts.
I would. As I wrote in #36 above, the critical point is the wording of the agreement. I don’t see why it should make a difference whether that agreement is between individuals or businesses. After all, what’s the difference between a business and the individuals who own it?
Let’s say I’m short on cash and I take my guitar down to the local pawn shop. They give me cash in the amount of a percentage of what the guitar’s market value is. I agree that if I do not repay the cash, the pawn shop will be able to resell the guitar for whatever they can get for it.
In such a case, where the value of the loan is secured by tangible property, would I be under a moral obligation to pay to get my guitar back regardless of the terms of my agreement with the pawn shop? ETA: In other words, would it be morally wrong of me to decide I no longer wanted the guitar?
Oh, well in that case, the question’s already been answered: you take a hit on your credit rating. You’ll have trouble getting financed for another house before 3 years have passed. If you can negotiate a short-sell or other structured withdrawal, the result will be a bit better, but don’t expect to get a decent interest rate on anything for a couple of years.
Oh yeah, and the other aftermath is you can get on with your life and quit throwing money and your soul away on a three bedroom ball-and-chain.
Keeve (or whoever chimes in), do you contend that all parties to transactions–from individuals through corporate entities–should be bound by the same moral code?
Have you agreed to pay back and separately agreed that the penalty for your breach of this agreement is that they keep the guitar? Or have you given yourself the option? The difference is significant.
FWIW, I would guess in the case of a pawnshop - what with the loan to value ratios typically being extremely low - that you most likely have never promised to pay back to begin with. In fact, the pawnshop owner probably would be fine with you saying upfront that you’d rather sell him the item for the loan amount.
Not so in the case of banks, who would much rather not foreclose. (In addition to the typically higher LTV ratio, the banks have to return the excess over what you owe, while - as I understand it - the pawnsop owner would not.)
So the nature of the agreement is a completely different one. Of course, the banks are taking a risk that borrowers will default, but fruit sellers and newstands leave stuff out all the time and take the risk that passersby will help themselves. Some risks are part of the business model but that doesn’t mean it’s moral to take advantage.
Again, this is as I understand it. Thankfuly I’ve not had any experience with pawnshops, and my answer is dependent on the facts above.
Rhythmdvl, I’ve already aswered this question. Of course they should.
In the real world, both the pawn shop and bank are basically laying out terms for the customer to agree to or find another business for their patronage. They understand their risks better than the consumer, and they are proposing the terms based on their understanding of the risks – it isn’t a consumer jamming the lenders with contract terms favorable to them when it comes to houses but not guitars.
As a consumer, and as the one agreeing to the lender’s terms, I would find it very, very difficult to understand the hidden message in contracts that say “pay the loan or we take your stuff,” versus “we’re going to take your stuff if you don’t pay the loan,” versus “you having your stuff is dependent on you paying your loan.” If there’s some sly, wink-wink-nod-nod within those phrasings of which loans are acceptable to default on and which are not, I’m not picking up on it.
And if a reasonably sophisticated consumer like myself (meaning I can read contracts fairly well but am not a lawyer, real estate agent, banker, etc.) can’t figure out which ones of those phrasings make default okay, then I’m willing to bet that virtually nobody would be able to discern the hidden intent of the lender.
I do think the world would be a better place if corporations across the board acted as moral actors–not just people for legal construction purposes. But unfortunately, their primary responsibility/moral imperative–profit maximization–sharply differs from actual people’s.
I think the schism here is that given the gamut of interactions and operations with corporations (acknowledging the Occupy-level generalization here), it is unreasonable to maintain inherently unequal moral standards when entering into contractual arrangements.
For the sake of greater economic development we have deliberately allowed one party-class to opt out of such moral constraints. Though it carries great harms, it is in general a wonderful, society-enabling thing. It is inconsistent, though, to insist that people/individuals conform to certain practices that institutions have declared invalid.
Aside from wishing that corporations were bound by the same moral code (and accepting the massive contraction in corporate wealth that that would entail), can you reconcile two parties entering into an agreement under such imbalanced ‘rules’?
Guys, not to rain on parades here, but could we take the morality debates to IMHO or GD?
In the case of my friends, they’re in Illinois. I’m not sure if that makes a difference, but I know that it was both mentioned and refuted that there’d be financial follow-up based on location.
Yes. Why not?
Are you suggesting that certain activities should be off-limits if I act as an individual, but okay if I act as an employee of a corporation? Why would that be? Can you give an example?
Example: Suppose I advertised that my car was for sale, but I did not name a price in the ad. Now suppose that I had some legal way to wiretap your phone, and I intercepted a call in which you said, “I’ll pay up to X, but no more.” Now suppose that X is way more than I was going to ask, but now that I know your budget, that’s how much I ask you for.
To me, that seems to be an example of morally wrong cheating. It would be wrong for individuals, and equally wrong for businesses. I just don’t see the difference.
Sorry, I didn’t realize you were an Occupier–that you agree with the loose idea that profit maximization should not be the primary focus of a corporation’s board of directors and officers, and that shareholders should be able to sue for breach of duty when a corporation’s decision-making body elects to follow a fiscally prudent and technically legal, yet morally questionable, path.
I tend to agree with you that it would be a better world in many respects, though I’m not sure I agree with you that the sharp curtailment in material wealth and a vastly reduced standard of living would be worth it.
I have never heard this term “Occupier” in this sense before, and I’m not sure if the Wikipedia article “Occupiers’ liability in English law” is relevant, so I thank you very much for your explanation.
Let’s put it this way: My feeling (and I really apologize to those who feel I’m stepping over the line into GD territory, but I do think we are working hard at clarifying the issues, rather than just shouting on soapboxes) is that, yes, indeed, profit maximization should be the primary focus of a corporation’s board of directors and officers. But although profit is the primary focus, there must also be limits. For example, the corporation must not exploit disadvantaged people, even if the law has not yet put those people into a legally protected class.
In my mind, I’m trying to come up with examples of the above, and now I’m starting to realize that there are many areas where the morality of a certain stand could be argued either way, and therefore it behooves the Board Of Directors to make a decision on the extent to which they choose to focus on profits or on these other issues.
For example, should we produce our products in some far-away place where the expenses are cheap and we can maximize our profit? Or should we make everything locally at a higher cost in order to support the local economy. Good people can disagree over which direction to go, and I suppose the Board should vote on official guidelines for the employees to follow. If they choose to go local, then shareholders cannot complain that their investment is being wasted, but they can certainly choose to pull their investment and go elsewhere. And if they choose to import cheap goods, those investors (and employees) who consider it to be unfair slave labor can likewise go elsewhere.
Hmmm… Did I just say that it is okay for the Board of Directors to vote on using slave labor overseas? Not exactly. What I’m saying is that if the action is questionable, then they need to take a stand one way or another. But if the act is simply out-and-out morally wrong, then it is off-limits, even if technically legal. And that brings me back to the OP, about “walking away from a mortgage”. As I explained my view above in #36, the decision of what is morally right and wrong should be made on the basis of what the agreement had been, and NOT on whether we’re dealing with individuals or corporations.
Having pondered these ideas, I’d like to adjust them slightly. I had written that
I’d now change that to being the default focus. The vast majority of corporations are founded in order to make a profit, but a notable number of them are devoted to social causes as well. (Ben & Jerry’s comes to mind, but there are many others.) It seems obvious to me that the Board of Directors needs to clarify these issues for the investors and employees.
It seems that I’ve amply demonstrated that not only is a corporation a legal person, but it can also have a conscience.
You are presenting a false dichotomy.
There is no contradiction between profit maximization being the primary focus on the one hand and being constrained by moral considerations on the other.
Same as an individual.
This seems to be an error. We are discussing moral aspects, not legal ones.
I would go as far as saying that the shareholders would not be able to sue for breach of duty if the corporations’s leadership elects to forgo some profits due to moral considerations.
But even that has its limits. If a corporation decides to forgo a cheaper but environmentally devastating mining technique, OK. If a corporation decides to donate all corporate profits to environmental causes, not OK.