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Abstract

Responding to the argument that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this Article argues that defaulting on a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Comments

  1. American Foresight says

    To start with, while this article might have an initial appeal, it does not hold water.

    The examples given are shallow in the sense that they are actions that don’t necessarily cause any societal damage. The effect of strategic defaults on the housing crisis has been far more serious than that. In fact, as a result of the exacerbation of the housing crisis by strategic defaulters, many more Americans have seen their homes lose even more value than at the unset of the housing collapse.

    Instead of spending time on questioning whether or not it is moral to default, spend time on creating a world that you would favor: one in which all actors – both corporate and individual – act or are required to act in socially responsible ways.

  2. Jim says

    The problem with your argument is that you are stating that home ownership is an investment when in fact it is not. A home is a place to live and there are no guarantees that it will increase in value. We've all been spoiled by the rise in home prices over the last few decades and now we decide to break a contract because the values have declined. I guess I'll quit paying on my car because it's worth less than I paid for it. Or anything else for that matter. Where does it end? I signed a contract to pay for something (my house) and I will do so. It's subsequent value is irrelevant to my contract with the bank.

  3. AA says

    I don't feel this is ok, and what if they rented out the home while letting it go into a strategic default? What about the tenants who live there and who are unsuspecting until there's a notice stamped on their door. In many cases, the tenants are not notified with the mandatory number of days (60+) to vacate the property.

    No one thinks about the renters, because many of these are also non primary homes or not owner occupied. That leaves the renters out of their deposit in most cases and having to uproot their whole family and endure additional costs that they probably cannot afford.

  4. Lee says

    What a joke. It's like the article said, the mortgage contract is a deal where you pay the monthly payments for the set time OR forfeit the property should you not. The 'default' part IS part of the contract,strategic or not. Why should struggling homeowners keep a property worth over 50% less when the bank doesn't want it. It'spart of the deal the bank agreed to...if it goes into default...keep their 'promise' and take the property.
    It's easy.

    I am now 'strategically' defaulting after 6 years of NEVER missing a payment. It hurts a bit, even though I now know I should have done it 1-2 years ago.

    The house is not an investment,we got it for our home, I couldn't care less if it went down to a $1.00 (mortgage 350,000+ current value $170,000), its our HOME, however my local township has let me know there is no such thing as owning your own home. School taxes have doubled from approx $6,000 per year to now $12,000!!! You can't negotiate with those bastards,worse than the banks. Local average wage approx $10.00 per hour...can you imagine paying 12 grand taxes on your mortgage, for a regular 3 bedroom 2500 sq ft house.

    Ironically its the taxes which have done it, they can go up a grand each year, if we paid our mortgage in full we'd still have to pay a low skilled workers yearly salary in rent to the township.

    For the last 4 years in winter the house it set to 48 degrees (just to keep the pipes from freezing) and we eat a main meal about once every 3 days, rest of the time its tea and toast...YET...our 3,200 per month mortgage gets paid without fail!

    No-one wants to help, the bank will only help if they get bribed and paid to do so by our own tax payer dollars,its ridiculous.

    For the first time, I looked at the house like I would my business...gee I love my Ferrari...but you know what I can't afford it...time to let it go.
    Perfectly understandable.

    We love our house, we'll be in tears when we leave,it is our home...yet we freeze and starve to feed the banks twice over (they already had our bailout money), while they can walk away from 'bad' assets and loans and smile like its a good way to do business. You know what..they are right for once...if it makes no sense...get rid of it and be free.

    We have 300,000 grand left to pay over 30 years.Option one...and freeze and eat 3 meals per week and give 3,000 grand to bank every month (vacations,eating out,new clothes...college...hahahah...forget them) OR I worked out if we save what we pay the bank, let them have the house (as it is agreed by them in our mortgage agreement), we can save 50,000 in 2 years or less...less than 5 years we can buy the similar house IN CASH (but not in this 12,000 per year township rent you'll never own) and keep warm in winter,eat a meal a day, have a vacation or two, visit family...actually LIVE and no longer be a slave to the mortgage. If we could eat and keep warm in winter I'd still be paying, but enoughs enough.
    The banks are in denial. That way of doing business is OVER FOREVER. This is important, many Americans are realising we have the banks balls in our hands. They are scared to death of strategic defaulters and even an idiot like me of 6 years paying,starving,freezing to 'DO THE RIGHT THING' (I've paid over the current value of our house already to them) can smell their fear. It will all collapse again, properly and this time WE SHOULD LET THE BANKS DIE...JUST DIE (not the small proper banks that work like banks used to do,they'll be a market for them),there'll be no more tex dollars for them, AND WE LEARN...this is what they are scared of...WE DO NOT CARE ABOUT OUR CREDIT RATING...no loan with fannie mae for 7 years...thats it...or financial freedom in a few years...mmmm...if I have saved all that money and am cash rich why would I need any loans from that criminal scum.

    We the people are not prepared to watch these so called banks/financial institutions continually break the law,get rewarded, get our tax dollars to keep going,get rewarded again, walk away from THEIR poor investments and let them intimidate us.

    In less than a month of considering this,I've learnt that a strategic default, providing we save what we do not pay them, we can be financially independant, buy a property outright cash if we so choose, and really LIVE...when you turn the corner it really is financial slavery and no wonder they are terrified of us doing this.

    Countries strategicaly default,Governments do it,business does it all the time...we the people are catching up, they are all right,its the way to go.

    It's no longer deadbeats, its people like us, credit scores of 700/800's, NEVER paid late,own our own cars,don't take benefit (we earn too much right,no help for us),WE KNOW HOW GOOD IT CAN BE IF YOU SAVE IT,simple maths.

    We just paid our last mortgage payment,we regret that now, but they won't get anymore from us. We will keep to the agreement and let them have the property in exchange for default,its in the contract.We're gonna have the house set to a mind boggling furnace of 60 degrees!!! Wow, our gas fireplace we only turned on Christmas day...now we can enjoy it more. Yes thats the sacrificies we made to pay the bank, becuase it felt the right thing to do.

    I'll leave it with my Postmaster who watched me lose all that weight and age too much each year...he said..."I know you think your doing the 'right' thing and its admirable...but this is America...you gotta play the game...THEY play it everyday with our lives..you gotta play the game"

    I guess I'm gonna play...but to me it just seems like common sense and a duty to my family. I HATE not paying bills (as you've seen I'd rather starve and freeze) BUT I can't justify it any longer, I'd be betraying myself and my family if we continued for 30 years feeding them and not us. Always remember WE have the power collectively, choose not to care about 'credit'...if you earn money pay cash, don't buy anything you can't afford and save.

    Freedom.

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