Morally Wrong….OR…Financially Sound?

Dillemma?Richard Zaretsky’s recent post……….


got me thinking. His post is talking about the amount of people who are making the “Strategic” decision to default on their mortgages. site had this  to say about the topic.

“A new survey conducted by the Kellogg School of Management in Chicago suggests that more than a quarter of mortgage defaults are strategic, especially when negative equity exceeds 15 percent.”

Some of the comments on Richard’s post were calling this a moral issue. As in “It is morally wrong to strategically default on your mortgage”.

So…….my question is“Is deciding to default on your mortgage, or not, a moral issue?”

Here are my thoughts: “Strategic Defaults” are rampant in my area. People are living in their houses as long as they can for free and saving their mortgage payments so they can move on with their lives and have a little bit of a nest egg.

These are people with families that have mortgage balances over $200,000 on homes that are now worth $60,000. Foreclosures and short Sales make up 90% of the market in Poinciana Florida and are still dragging prices down.

There is no chance in hell of these properties EVER being worth $200,000 again. At least not in the next 10-15 years..

These borrowers are so far underwater they will NEVER be back on top again. So…. whether they make payments or not, at some point they will have to sell, due to life circumstances i.e. job relocation, divorce, marriage, death… makes sense to take the hit now and start rebuilding.

To compound the issue….folks see all of the “bailouts” for the banks and start thinking “Where’s mine?” So they create their own bailout.

Is this a moral issue? I don’t think so. As much as I hate to say it…I think it’s a sound financial decision. What say you?


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