I'm currently in the process of walking away from a home out of state. I moved from Delaware to California close to 3 years ago due to a really good job opportunity. I couldn't take the hit in selling our house at the time since it was underwater, so I wound up renting it out. Through that time I have had 2 renters on the property, both of whom wound up walking away from their leases. The last renters trashed the place and I could not afford to get it fixed up enough to rent it out again.
So I was stuck with an unrentable home out of state that I could not afford to fix up and could barely afford the mortgage payments on. Therefore I just decided to simply walk away from it.
Given that context, I simply cannot understand how people can say it's either immoral or unethical to walk away from a house. The loan modifications that banks try to shove down your throat are generally shitty deals, they simply want recapitalize all of your late fees and missed payments back into the principle, putting you further underwater. Working out a more equitable deal with the home retention folks is damn near impossible. Not to mention all of the collections calls and come ons from unscrupulous firms that want thousands of dollars to try and work out a deal for you. Walking away is an act of last resort and the financial and credit penalties are there to mitigate it.
> "I simply cannot understand how people can say it's either immoral or unethical to walk away from a house."
It's a social hack, leveraging legacy social behavior.
When loans were primarily between family, friends and neighbors who are not professional businessmen, the social pressure is beneficial to the community. If you took advantage of the lender, the community would be less cooperative in the future.
That no longer being an accurate description of most business deals, individuals are still encouraged to think of legal contracts as being akin to their social/moral 'word' (of honor). This gives an advantage to the businessman who treats it as a legal contract and nothing more.
The individual, once-convinced, will go to great lengths to ensure moral justice, dramatically mitigating the financial risk the businessman agreed to.
e.g. the mark is socially pressured to accept increasingly-onerous terms to try and repay a debt he 'swore' to repay; even though the contract clearly stipulates interest as the price of the businessman's risk in the first place.
Most people just don't realize their tradition is being used against them. The rest are encouraging the stigma because they like being paid interest for one risk level, but actually enjoying a much lower real risk.
See also: credit counseling and debt restructuring as new legal pre-requisites to filing bankruptcy. It dramatically lowered risk of lending, without any commensurate decrease in the cost of borrowing. Yet bankruptcy is still stigmatized as something that only happens to deadbeats and losers. The skyrocketing proportion of bankruptcies due job loss or medical costs are brushed under the rug. The price of interest being the bank's reward for accepting the risk of lending is brushed under the rug.
Sure, I agree with all that. What I meant by my statement was that I could not understand how a significant proportion of an otherwise entrepreneurial and libertarian leaning audience could be arguing that default is a moral lapse.
"I simply cannot understand how people can say it's either immoral or unethical to walk away from a house"
You signed a contract. That's what makes it unethical to walk away. You put yourself in the position that you are in. You may think you took a better job offer, but actually if you had considered your circumstances, the job offer was not that great because of the obligation to the mortgage company where you lived for the house that you bought.
You say that you could "barely" afford the mortgage payments which implies that you could afford them. The last paragraph of your response is just a list of excuses to make yourself feel better about the course of action that you have taken. Your part of the problem, not the solution.
The contract carefully outlines what is it to happen in case the borrower finds himself unable to make payments. It is not as if he's stolen the money; he's loosing the property AND the percentage of mortgage payed so far.
The lender is to keep all the cash received so far, and the ownership of the house as well. If the property happens to have been so overpriced that he's loosing money anyway... so bad. They are supposed to be professionals asserting the risk. If they chose to ignore those risk in order to push a deal more attractive to the customer/borrower, guess what, they gambled and they loose!
Do you feel that bankruptcy is an unethical process? Perhaps we should bring back debtors prison? After all, miscreants like me put ourselves in this position. Should we not pay for our mistakes through indentured servitude if need be? Perhaps we ought to pass our debts on to our children.
So I was stuck with an unrentable home out of state that I could not afford to fix up and could barely afford the mortgage payments on. Therefore I just decided to simply walk away from it.
Given that context, I simply cannot understand how people can say it's either immoral or unethical to walk away from a house. The loan modifications that banks try to shove down your throat are generally shitty deals, they simply want recapitalize all of your late fees and missed payments back into the principle, putting you further underwater. Working out a more equitable deal with the home retention folks is damn near impossible. Not to mention all of the collections calls and come ons from unscrupulous firms that want thousands of dollars to try and work out a deal for you. Walking away is an act of last resort and the financial and credit penalties are there to mitigate it.