The Morals of Walking Away from Your Mortgage and House

"You signed a contract Mr. Potter!"

To summarize all of the arguments I’m about to make, let me say THERE ARE NO MORAL ISSUES IN WALKING AWAY FROM YOUR MORTGAGE AND HOME.

But Mr. Blogger, these people made a promise. Doesn’t that count for anything anymore?

Excellent question. Business is the dominant life form in America. Business lays off 30 year employees because it is legal and economically good for the company. Business pollutes because it is legal and economically good for the company. Business lobbies congress for fewer regulations and less oversight because it is legal and economically good for the company. Business gives you a 0% credit card, and then raises the rate to 30% once you have a huge balance because it is legal and economically good for the company. Business had the US bankruptcy laws changed to make it harder for people to walk away from their credit card debt because it is legal and economically good for the company. In other words Business has no morals, and Business will do absolutely anything to anyone as long as it is legal and economically good for the company.

Well a funny thing happened recently. The housing market self destructed. And now tens of millions of people owe the banks more than their houses are worth, sometimes 100s of thousands of dollars more. The lenders and the borrowers agreed to the terms of their mortgage contracts. These contracts can come in a hundred different flavors, but basically they all say that the borrower has the duty to pay his mortgage, or he has to give his house to the bank. That is what the contracts say. They do not say that the borrower will go to Hell if he does not pay. They do not say that the borrower will go to jail. They say that the penalty for not paying the mortgage is the house. And therefore, if is legal and economically good for YOU, feel free to walk away from your house and let the bank have it.

I am not saying you should try to live in the house without making payments until you are evicted. That’s not nice. But if you and your lawyer (you need a lawyer to look at all of your loan documents) agree that it is in your best interest to walk away, then do it. And don’t feel bad. The bank doesn’t feel bad when it hits you with a giant bounced check fee, or with a credit card late fee. And it doesn’t feel bad about evicting people who can’t pay their mortgages. Why doesn’t it feel bad? Because what it is doing is legal according to the contracts that everybody signed. And so is dumping your sinking house back on that very same bank.