The problem is that you're buying something today and paying for it for the next 15/30/50 years.
Sareitha Sedai Send a noteboard - 13/10/2010 03:04:26 PM
Say you buy a foreclosed home from the bank that writes the mortgage. For simplicity's sake let's say you buy the home for $250,000, finance 100% of it, and that's the appraised value of the home.
In five years you are still making mortgage payments. The home now appraises for $325,000. Is it moral for the bank to tack that extra $75,000 onto the remaining loan principal?
In five years you are still making mortgage payments. The home now appraises for $325,000. Is it moral for the bank to tack that extra $75,000 onto the remaining loan principal?
That's basically a like shorting a property, from your pespective. You buy in the hopes that the value of the property goes down (to be fair, the agreement should work both ways - if the property depreciates, so should the amount of the mortgage you owe). I don't see why a contract couldn't be written that way. (Except if you were doing this with stocks, you'd have to put up collateral to insure against the risk of the losing party simply walking away. Positions are then valued daily, and if the the amount of collateral becomes insufficient, you may be forced to close the position.)
A real-life example is an adjustable rate mortgage - if interest rates go up, so does your mortgage payment. Yes, very legal, and very many banks did just that. It's all a matter of how you structure the legal agreement.
The bank accepts your house as collateral for the loan. It is the bank's burden to ascertain that the value of the collateral is sufficient to cover the value of the loan in case of default. Period. If a bank writes a mortgage for $100,000 on a property worth $80,000, it deserves to lose the money - it's acting stupid and greedy, not considering the risks.
The whole point is that this isn't like an ARM situation, where both parties have legally agreed to the loan amount floating based on some benchmark. It's a one-time valuation and a one-time sale, and is a non-issue if somebody pays cash for the home. The bank at the inception of the mortgage is loaning money against the value of the home at that point in time, and the homeowner is agreeing to purchase the home for a price based on that same value.
If you are from Betelgeuse, please have one of your Earth friends read what I've written before you respond. Or try concentrating harder.
"The trophy problem has become extreme."
"The trophy problem has become extreme."
Is walking away from a mortgage immoral?
- 12/10/2010 04:45:43 PM
1517 Views
Just as a contract is a two way street -
- 12/10/2010 05:12:09 PM
1008 Views
Of course it's immoral.
- 12/10/2010 05:13:16 PM
969 Views
But does one sided morality work?
- 12/10/2010 05:38:56 PM
1094 Views
You asked about the morality of walking away when the borrower still has the ability to pay.
- 12/10/2010 07:31:10 PM
889 Views
A company or organization cannot act morally or immorally? I strongly disagree. *NM*
- 12/10/2010 07:50:42 PM
439 Views
No, it cannot. However the individuals making the decisions for the company can. *NM*
- 12/10/2010 08:48:23 PM
385 Views
If banks can not behave in moral manner why should people be expected to behave in moral manner?
- 12/10/2010 08:07:56 PM
955 Views
I'm not absolved of my obligations based on the bad behaviors of others.
- 12/10/2010 08:25:33 PM
872 Views
Because it's their moral obligation. Morality is not a trade, you act morally because it is right
- 12/10/2010 08:47:41 PM
1069 Views
That's the only kind of morality there is! What the hell is wrong with you?
- 12/10/2010 08:15:55 PM
916 Views
nothing wrong with me but I think you are off your meds again
- 12/10/2010 09:34:33 PM
913 Views
Re: nothing wrong with me but I think you are off your meds again
- 15/10/2010 02:50:49 PM
1420 Views
well I really can't argue with the wrong is wrong end of story belief system
- 15/10/2010 05:40:22 PM
1112 Views
A contract isn't a promise; it's a legal agreement. *NM*
- 12/10/2010 06:25:24 PM
456 Views
Which is why contracts have to be pages and pages long and combed over by bloodsucking lawyers.
- 12/10/2010 06:39:18 PM
956 Views
I would agree with you if contracts didn't provide for breaking them.
- 12/10/2010 07:33:15 PM
801 Views
Hrm.
- 12/10/2010 07:35:38 PM
1023 Views
did you take a personal oath in front of god and your loved ones to pay the loan back? *NM*
- 12/10/2010 08:09:07 PM
453 Views
Let's assume we're talking about a marriage where no such oath was taken... *NM*
- 12/10/2010 08:10:54 PM
465 Views
if there is no oath of fidelity then straying would not be immoral *NM*
- 12/10/2010 08:40:53 PM
433 Views
It's not immoral to break the marriage contract.
- 12/10/2010 08:19:50 PM
1068 Views
That must be why they have you sign something called an agreementory note 
*NM*
- 12/10/2010 07:33:32 PM
474 Views
*NM*
- 12/10/2010 07:33:32 PM
474 Views
I don't think it's immoral at all. The contract usually specifies penalties for breach.
- 12/10/2010 05:28:34 PM
1059 Views
You didn't mention the third party
- 12/10/2010 08:26:56 PM
832 Views
in a way I did since I did mention society
- 12/10/2010 08:54:07 PM
981 Views
What if you look at it from the other perspective?
- 12/10/2010 09:00:20 PM
1004 Views
Sure, you could do that.
- 13/10/2010 01:54:55 AM
994 Views
The problem is that you're buying something today and paying for it for the next 15/30/50 years.
- 13/10/2010 03:04:26 PM
888 Views
As a professional in financial services - no, it is not.
- 13/10/2010 01:44:18 AM
938 Views
but almost nobody sees it that way
- 13/10/2010 12:53:25 PM
943 Views
Is the deal that if you default, the bank gets the house and nothing else, though?
- 13/10/2010 02:40:48 PM
926 Views
I think it's morally wrong to walk away from credit card debt. *NM*
- 13/10/2010 09:43:11 PM
432 Views
I agree, what do you think is different?
- 13/10/2010 09:59:36 PM
953 Views
The difference is that the bank owns the house. Whereas when I buy stuff, it's mine. *NM*
- 19/10/2010 07:05:34 PM
428 Views
I too am unable to work out what distinguishes the two situations.
- 13/10/2010 11:54:15 PM
890 Views
I lost sleep over it, but I did it anyway.
- 13/10/2010 05:24:19 AM
1031 Views
Obviously, the essential difference is can't pay versus won't pay.
- 13/10/2010 02:16:07 PM
924 Views
are you socializing your debt when it is a private bank?
- 13/10/2010 03:14:48 PM
982 Views
You are when said bank requires a bailout. And very many of them do.
- 13/10/2010 03:22:59 PM
924 Views
I really don't understand a system where this could be an advantage.
- 13/10/2010 11:16:57 PM
936 Views
There's generally something like a 7 or 10 year limit on credit reporting here.
- 13/10/2010 11:46:58 PM
956 Views
What's the use of suing someone who has no money? *NM*
- 13/10/2010 11:48:47 PM
492 Views
You can garnish their wages.
- 13/10/2010 11:49:36 PM
937 Views
With parsley?
- 13/10/2010 11:51:37 PM
1006 Views
No, "someone" most certainly did not, wicked young Miss! Hmph! *NM*
- 13/10/2010 11:52:40 PM
478 Views
If they suddenly come into some, you're entitled to it. *NM*
- 14/10/2010 12:07:34 AM
556 Views
Bit of a long shot. *NM*
- 14/10/2010 12:09:12 AM
426 Views
Very. Best to cover your bases though. *NM*
- 14/10/2010 10:04:25 PM
447 Views
Not if the doctrine of election applies.
- 14/10/2010 10:14:07 PM
908 Views
Are we not talking about credit companies going after people who owe them money?
- 14/10/2010 10:18:47 PM
957 Views
I am currently in that situation...
- 14/10/2010 05:03:23 AM
1061 Views
In Washington you can contest the assessed value used to determine property taxes.
- 14/10/2010 07:27:02 AM
977 Views
it is easy for me and others to be glib when it is just a theory *NM*
- 14/10/2010 08:19:16 PM
433 Views
If you have the ability to pay, I would consider it yet another immoral act in an immoral industry.
- 14/10/2010 07:49:38 AM
971 Views