Of Morality and Mortgages

Is doing the right thing passé?  Consider the following passages from Walk Away From Your Mortgage! that encourages borrowers to default on their mortgages even if they can afford to pay (all emphasis added);

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.

First, there is a certain logic to loan pricing.  The interest rate is lower for a primary residence than investment property because it is believed that when financial problems hit the borrower is more likely to continue to pay for the roof over their head then the property they bought as an investment.  This logic filters through the entire consumer loan pricing structure-ie., the interest rate on vehicle a consumer uses to drive back and forth to work is lower than the interest rate on the jet ski they use a few weekends a year.  Certainly, if the moral obligation to pay ceases to exist the increased risk will be reflected in interest rates being increased across the board.  However, this does not speak to the main reason why consumers should not "walk away" from their obligations.

The article implies that morality is passé.  I was raised that a person is only worth as much as their word.  Making a commitment and keeping it is intrinsic to moral behavior.  We've long been told to corporations exhibit the lowest of all behaviors-greed, ruthlessness, immorality, and yet, the article sets up the corporation as the model that we should follow.

I would argue that standing by one's obligations is necessary to social cohesion.Throughout the social spectrum the person who meets their obligations to themselves, their family, their community and yes, to their financial institution adds value to society  whereas those who walk away from their obligations debase society as a whole. 

Our society will collapse without morality.  It is a simple concept that the New York Times, as evidenced by this article, does not grasp.