60 Minutes - On Walking Away From Your Mortgage, And Now EVERYONE Wants To Know How They Can Do It

The Business Insider ^ | 5-10-2010 | Joe Weisenthal

[Crichton]

The moral obligation is to live up to the commitments that one makes.

Poppycock.

The commitment specifically countenances the possibility of default.

The lender sure as hell isn't going to refund the borrower the extra interest the borrower pays to cover the risk of default. Neither does the borrower have any obligation to make charitable donations to the lender or bank who owns their mortgage. In a fair contract, both parties should be able to follow their own self-interest.

If you can't pay your mortgage, the lender is entitled to foreclose on you. If your mortgage no longer makes financial sense to you, the borrower is entitled to walk away and incur the resulting penalties. Fair's fair.

[The Pack Knight]

Contracts and torts are the very first thing any law student learns, and to say that a piece of paper you signed stating you will pay, in full, the amount of money borrowed is no longer valid because that person bought at the wrong time will cause mayhem in the court systems. These legal precepts are the cornerstones to our justice and legal system, and to say that reneging on a contract due to hardship or inability to pay is okay will facilitate the abuse of contracts in the future.

Who is saying the contract is no longer valid? Typical residential mortgage agreements say that if the borrower defaults, then the lender's remedy is to foreclose on the collateral. If a borrower walks away and the lender forecloses on the house, then it seems to me that the contract is being enforced to the letter.

Are you saying the borrower should be subjected to some further punishment beyond contract remedies? If so, you should know that punishing breach of contract with punitive damages or criminal liability is something that was abandoned by the Anglo-American legal system centuries ago.

I see nothing wrong with someone walking away from an underwater mortgage as long as that person is willing to live with the consequences. The idea that a loan agreement with a bank creates some sort of moral relationship with moral duties is absurd.