Ethical considerations (none) for defaulting on non-recourse loan.

[kev374]

walking away from your home when you can afford it is VERY UNETHICAL, but only because the taxpayers are now bailing out the banks because of it.

IF taxpayers were not involved in any way and the system was 100% freemarket, i.e. banks would take losses and shut down then I see absolutely no problem with walking away…it is between the borrower and the bank.

But because of the bailouts this is affecting everyone now so yes it is unethical.

[UCGal]

[quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

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.

[UCGal]

[quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

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.

[UCGal]

[quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

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.

[UCGal]

[quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

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.

[UCGal]

[quote=SK in CV]Great post analyst.

When homebuyers and lenders enter into mortgage contracts, each side takes on risks. Included in the risk that the lender assumes, is that the collateral will maintain value in excess of the loan amount. When that doesn’t happen and a homeowner continues to make payments, for whatever reason, they are performing above and beyond the implied expectations of the contract.

I find it no more immoral for borrowers to stop paying in these circumstances than for the lender to foreclose. (Actually, I don’t think ethics or morals should even be a consideration. Lender corporations, despite the courts treatment of them as a “person”, rarely act out of ethical or moral considerations. They act based of legal considerations.)

Things get a little bit dicier for recourse loans, risks are greater for the borrrower, more options exist for the lender. But morals and ethics still don’t come into play in any greater degree. Risks are still taken by the lender. And the legal consequences of failing to pay are spelled out in the contract. Both borrower and lender have to live with those consequences.[/quote]

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.

[Reality]

This looks like it’s related to the “short sale tale” thread.

The guy over there can afford the mortgage but wants out because he’s upside down. Even though he may live in the house, that’s an investor to me.

We shouldn’t be bailing out banks period, and certainly not to reward poor investment choices.

[Reality]

This looks like it’s related to the “short sale tale” thread.

The guy over there can afford the mortgage but wants out because he’s upside down. Even though he may live in the house, that’s an investor to me.

We shouldn’t be bailing out banks period, and certainly not to reward poor investment choices.

[Reality]

This looks like it’s related to the “short sale tale” thread.

The guy over there can afford the mortgage but wants out because he’s upside down. Even though he may live in the house, that’s an investor to me.

We shouldn’t be bailing out banks period, and certainly not to reward poor investment choices.

[Reality]

This looks like it’s related to the “short sale tale” thread.

The guy over there can afford the mortgage but wants out because he’s upside down. Even though he may live in the house, that’s an investor to me.

We shouldn’t be bailing out banks period, and certainly not to reward poor investment choices.

[Reality]

This looks like it’s related to the “short sale tale” thread.

The guy over there can afford the mortgage but wants out because he’s upside down. Even though he may live in the house, that’s an investor to me.

We shouldn’t be bailing out banks period, and certainly not to reward poor investment choices.

[SK in CV]

[quote=UCGal]

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]

Good point UCGal.

The only caveat I would add is that IF the borrower offers a deed in lieu, and lender rejects it (which almost ALWAYS happens), then the onus is shifted back to the lender. If no deed is offered, and the borrower just stays and waits for a foreclosure sale, I agree entirely.

[SK in CV]

[quote=UCGal]

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]

Good point UCGal.

The only caveat I would add is that IF the borrower offers a deed in lieu, and lender rejects it (which almost ALWAYS happens), then the onus is shifted back to the lender. If no deed is offered, and the borrower just stays and waits for a foreclosure sale, I agree entirely.

[SK in CV]

[quote=UCGal]

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]

Good point UCGal.

The only caveat I would add is that IF the borrower offers a deed in lieu, and lender rejects it (which almost ALWAYS happens), then the onus is shifted back to the lender. If no deed is offered, and the borrower just stays and waits for a foreclosure sale, I agree entirely.

[SK in CV]

[quote=UCGal]

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]

Good point UCGal.

The only caveat I would add is that IF the borrower offers a deed in lieu, and lender rejects it (which almost ALWAYS happens), then the onus is shifted back to the lender. If no deed is offered, and the borrower just stays and waits for a foreclosure sale, I agree entirely.

[Author]

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