C.E.O. of the Mortgage Bankers Association... said... homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.”
Indeed it is sometimes thought to be a moral obligation to live up to your end of a contract you've signed; and maybe therefore people should not walk away from their mortgages. And yet, as Lowenstein points out, corporations will walk away from their debts if it can be calculated the economically rational thing to do.
... the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?
Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with.
What do readers of the Parr Center blog, Ethics in the News, think?
Matthew Yglesias (a Harvard philosophy B.A.) at Think Progress writes:
[Imagine] my friend says he wants to meet for a drink at 8PM, and I say “are you going to show up 15 minutes late as usual?” Then he says “No way. If I’m late, drinks are on me.” [If] he shows up 20 minutes late, but follows through on his promise to pay the tab I think it’s fair to say that he’s still open to moral criticism. Similarly, a person who drives all around town blocking fire hydrants is doing something wrong even if he willingly pays all applicable fines in a prompt manner.
While this is a nice example, Yglesias shows that there is a difference:
... my mortgage is an agreement I’ve made with Bank of America which is a publicly traded for-profit corporation. Companies like that, unlike people ... or other kinds of institutions, don’t recognize any kind of goals other than monetary ones. Under the circumstances, any relationship you might have with Bank of America is a purely transactional, purely commercial one and if you treat it as anything other than that you’re being a sucker.
... families that think it serves their interests to default on mortgage payments shouldn’t feel morally obligated to avoid default.
Comments?
1 comment:
yes, let's not confuse the holders of mortgages with rational, moral, individual human beings. the mortgage industry was built to the cliff's verge due to no-one but themselves. it was not the individual homebuyer who brought the housing market into decline, and the capital markets into collapse. it was the huge multinational banks that profiteered from wreckless conduct, and immoral behavior.
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