Back in November, University of Arizona law professor Brent White received widespread media attention for his suggestion that homeowners who are severely under-water should walk away from their mortgages.
Now a new piece in next Sunday’s New York Times Magazine revisits the idea — adding the observation that businesses of all sorts routinely walk away from debts when it makes financial sense to do so. But, unlike individual consumers, who face scorn and ethics-based pressure to keep paying their mortgages even when it makes little financial sense to do so, companies regularly stop paying loans, allow foreclosure and declare bankruptcy when they feel it is financially beneficial to the firm.
It’s an interesting question. Is it wrong for homeowners to decide to walk away from their mortgage obligations? Or, is surrendering the property a fair, normal option under a mortgage contract, since foreclosure is a possible outcome defined by the agreement? And, whatever the answer … should the moral standard be the same for businesses as for individuals? Comments encouraged!