I would argue that to stop paying while continuing to live in the home is unethical. It’s trying to play both sides. Breaking the contract but still reaping the benefits (occupation of the house.)
I believe that there is plenty of blame and pain to share among the parties to the contract – borrower loses downpayment and takes credit hit. Lender takes hit to investment and has costs associated with reselling the property. But if the person doesn’t vacate and chooses to not pay – in some ways, that’s theft. It’s kind of like “dining and dashing”. They are reaping the benefits without the costs.[/quote]
The only reason that the lender cannot quickly and effectively close out the situation with a foreclosure sale is because that lender had previously participated (along with the real estate sales force) in convincing the owner-occupant-borrower to overpay for the home.
When people receive punitive damages in court cases, it is not because they “deserve” them. And the fact that they accept them does not make them unethical.
The purpose of the punitive damages concept is to exact a substantial penalty from the party allowing harm to occur, so that they will try seriously not to let it happen again. That is also the purpose of “non-recourse” laws.
In the short run, certain parties receive benefits they may not truly deserve. In the long run, other parties are (hopefully) convinced to refrain from inappropriate activities, to the benefit of the larger community.
