Ethics in Foreclosures
Clients struggle with the ethics/morality of asking for a modification if they actually still have some savings left, or of selling short when their 401K has enough to cover the shortfall, and with the right/wrong of simply walking away from a home that is $250,000 underwater. I even had one client tell me last week that she felt it morally wrong to miss a monthly payment in order to get the lender to negotiate in good faith to lower the monthly payments on her home. She said that her moral voice was speaking to her…I asked her to check to see if it wasn’t really her pride talking! I have become hardened, no doubt….but, GROW-UP!
Bob Hunt said it well in a September 29 article in RealtyTimes. “Those with a moral sense know that, on the face of it, it is morally wrong to break one’s promise. But conditions, most would agree, have a bearing on that judgment. Promise-keeping is not the highest moral value. If I promised to lend you my gun, and you are now in a clearly dangerous psychotic stage, breaking my promise would be the right thing to do, not a wrong.
Here, the duty to keep a promise is outweighed by the duty not to put others – perhaps even one’s self – in preventable danger.”
And, “Beyond the observation that promise-keeping is not the highest moral value, it is also important to remember that a mortgage note is not like a typical promise. To be sure, almost all notes contain the phrase “I promise to pay…” Still, with a mortgage, the borrower and the bank make a deal. The deal is: “if I don’t pay, you can have the property.”
Mortgages are secured notes. They are not like borrowing from your grandmother. If you willingly default to her, shame on you. She has no recourse. But, if you default to the bank, they can take your property. That is the deal they made. The property may not be worth what they lent you, but whose fault is that? They are big boys and girls. They made a business decision, and in today’s market, they lost.”
Moral considerations are one of the chief barriers to strategic defaults. They probably exert more weight than they should. The lender made a deal. If you don’t pay, he gets the property. So now, in 2009, he gets the property; and he doesn’t like it. That is regrettable; but a deal is a deal.”
This is a new times that require action on your part to steady your financial ship. If you use old paradigms to guide your actions, you will be left behind. Rather, use your moral compass to deal effectively with this new reality.
Wow, that sounded a whole lot more philosophical than I meant it to be! Maybe a re-write is in order?
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