I came across this very interesting article a few weeks ago: How to Strategically Default On Your Home. Basically, the article argues that banks and mortgage companies have a double standard that obligates homeowners to pay their mortgages, even when the mortgage is underwater. At the same time, however, those same banks won’t think twice about walking away from a contract that turns out to not be financially feasible.
My GD question is this: Is the author right? Does the homeowner have a “moral obligation” to continue paying on a loan even with no expectation of return to previous value?
I say he’s right. The homeowner has no moral or ethical obligation to stay in a contract that hurts him or her as long as he or she accepts responsibility for the the penalties, often which are relatively much more severe and ruinous than those levied on corporations.
I’ve said it before and I’ll say it again, worrying about morals when dealing with big business is like showing up to a gunfight without a gun.
You have zero moral obligation to them. What you have is strictly a legal agreement with them, that if you stop paying your mortgage they’re free to take your house. If you feel not paying (and losing the house as a result) in your best interest, then you can walk away with a clear conscience.
If the contract you agreed to says you must stay in the home no matter what, then you might be morally obligated to stay. (But that might be arguable.) If the contract gives specific things that will happen if you walk, and you are willing to live with them, you have no moral obligation at all to stay.
Especially since the banks can renegotiate loans with government support, and have mostly refused to do so. Especially since the banks cut corners by not filing transfers with the counties where the house is to save money. Especially since the banks, to save money, didn’t hire enough people to keep up with the paperwork and outsourced it to robosigners. And the hypocrisy mentioned in the OP is telling also.
No. Definitely not. The only obligations are those imposed by contract and law. Both parties know the obligations and the risks and there is no explicit morals expectations. Either party should be able to take advantage of a strategic default within the terms of the contract and law because both bargained for exactly that.
The whole point of a contract is to spell out clearly, unambiguously, and completely what the obligations of each party are. In other words, if it’s not in the contract, it doesn’t matter. That’s the whole point of a contract.
So, no, you have no moral obligation not to strategically default. You have a contractual obligation to suffer the penalties specified, and that’s it. If you’re okay with those penalties, then go for it.