I’ve made this point before–if your mortgage is underwater, you should consider a ‘strategic default’ (which is what it would be called if you were a business), and, unless you were speculating, it’s not unethical to do so. First, you didn’t force the lender to give you the money (and to the extent that there was fraud, it was usually the lender who enabled it–ninja loans, for instance). Second, since housing loans are traded as commodities, there is no community bond: you’re not hurting the ability of a local bank to make loans to your community (or driving up the borrowing costs of your neighbors).
In today’s NY Times Magazine, Roger Lowenstein makes a similar argument:
There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.
The other reason is that default (supposedly) debases the character of the borrower. Once, perhaps, when bankers held onto mortgages for 30 years, they occupied a moral high ground. These days, lenders typically unload mortgages within days (or minutes). And not just in mortgage finance, but in virtually every realm of our transaction-obsessed society, the message is that enduring relationships count for less than the value put on assets for sale.
And, like the Mad Biologist, Lowenstein also believes in caveat mutuor (italics mine):
No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth.