>> this is not an ethical issue. It is merely a contractual issue.
I disagree.
I have never undertaken a significant financial obligation that was not backed by what is called a “promissory note”.
The “promissory” verbage is (ethically) important. It is worded that way because the borrower is PROMISING to repay the money they borrowed as agreed.
It is extremely clear in any promissory note that the essence of entering this contract is that the borrower will pay it back as agreed.
Giving back the collateral because of non-payment is never viewed by EITHER party GOING INTO the contract as an acceptable option. It is a REMEDY in the event that the borrower does NOT uphold the agreement.
You know this as well as I do.
Your position is playing games with semantics and demanding that others see the world through your distorted glasses. Sorry, but I know better.
Ok, I can see the point but let’s take it to a slightly different degree and illustrate the other side.
Say you have a credit card with a 25% interest rate. The bank asks you to pay a minimum balance every single month. They encouraged lots of people to do that with ever increasing lines of credit, smaller minimums, and even sent checks out in their solicitations. Now those were the heady days of banking but we all remember their exhortations to people. I couldn’t rip the enevelopes up fast enough.
Now did the banks enter into a contract with those people with an expectation of payment? No. They wanted to drag it out as long as they could.
I am not an anti-bank person, far from it. But to wrap up contracts in ethics is dangerous. There are risks associated and the banks walked in with eyes wide open. The banks certainly knew better than the consumers what they were doing and they gambled up.
My first mortgage had a pre-payment penalty buried deep into it (hidden, btw, on purpose IMO). Boy, that was a good lesson for a 20 something year old getting his feet wet for the first time. Never repeated that mistake.
I’ve been thinking about this scenario for some weeks now, there have been discussions like this before with the same arguments, anyway, I’ll have to dig up my old mortgage and see what it says, but isn’t a mortgage similar to a car loan in that the home is the security like the car is? And if you stop paying for your $50,000 car and the bank repossesses it, then auctions it for $30,000 don’t you still owe the difference minus any principle that you already paid? I mean, the bank paid the car dealer the $50000 on your behalf, because you promised to pay them back. I remember a few years back, reading about a guy that reported his car stolen and then torched it hoping the insurance would pay the bank and save his credit score. The insurance paid wholesale and he ended up owing the difference???? How is a house and mortgage any different, other than cars depreciate and houses normally don’t???
Two words: Secured loan. But for real estate it goes deeper than that. We all know you can not walk away from a car loan, for obvious reasons.
You are right about the Promissory note. That is why I try to include the caveat that my position only applies to loans where the local contract law allows contracts written in certain ways to be simply “two option” loans. And most of them are. When one gives the keys back they are merely taking option “b”. It’s kind of like exercising an option to buy (on a lease) when prices have skyrocketed or choosing to not exercise it when prices have collapsed. It is not about morality. It is about contract law.