Actually, stopping payment isnt actually ‘breaking the contract’. The contract has terms and conditions to allow for such eventualities. Breaking the contract would be to stop payment and not give up the house. This is the reason banks can have the sheriff evict people for non payment.
If it were a signature/hand-shake loan with no recourse then I would say refusing to pay is immoral; but banks dont make those loans.
As long as no one lied on the documents which reportedly happened quite a bit, and as long as the bank receives the house in fair conditions which also reportedly doesnt happen sometimes…..then it is a legal contract. If it were not legal to walk away banks could prosecute. As it is, they cant. Banks can prosecute for fraud or destruction of property because that is illegal.
Granted morality isnt legislated. People have slightly different twists to the same general moral code. The law does provide an outline to our society’s moral code.
I sold in 2003, have rented ever since and didnt specu-vest. This blog bashes the Casey Serin types, and i do too because he admited fraud….but for those who didnt the banks effectively and legally allowed people to bet on housing futures with free money. It’s as stupid as someone giving away free chips to a casino and saying “anything you win, we’ll split 50/50 but if you lose…don’t worry about it”
Personally, i didnt do it, but i think some people who did are quite clever, especially those who cashed out and weren’t caught with their hand in the cookie jar. What would be terribly immoral would be to change the rules midway through the game and penalize those people, and in effect help the bank, by raising the barrier to walking away. Now THAT would be drastically unfair to specu-vestors regardless of how stupid, crooked, slimy or other negative opinion people might have of them……
It is just as unfair to change the tax law and allow walk-aways to avoid tax on the loss. That is grossly unfair to all the other tax payers, and in fact to the banks as the barrier to walk was lowered to absolute zero.
There is no legal reason people can’t walk away, and changing the law now would be immoral. Banks and CDO investors should take their medicine while the folks at Moodys, Fitch and S&P who rated paper AAA when a 7 year old could see it was garbage AND collected tens of millions in extra fees for doing it…those folks should go to jail; especially in a system which, as they well know, requires pension funds, fixed income mutual funds etc to invest in only AAA paper. What they did is completely immoral and perhaps illegal. Im still waiting for that elephant in the room to head to prision………….
