Read any online article about people who walk away from their mortgages (strategic or otherwise) and you will usually see a ton of comments following condemning people who walk away as immoral and irresponsible, often with an extremely mean tone (“I wish they’d all die”) and a moral comparison (“I would never do something like that”). Several claims are made: The walker is violating a contract. The walker is responsible for a drop in housing prices, the struggling economy, or dieing neighborhoods. The walker is stupid for abandoning real estate when everyone knows the prices values will come back, if only they didn’t walk. The walker shouldn’t have overbought and should be required to pay for that mistake for the next several decades. The walker is evil.

Since a moral code pretty much defines civil society, I have thought about this a lot before making my choice. Certainly, like most people, I don’t want others to think me immoral. More importantly, I don’t want to look at myself that way.

A home mortgage is a business agreement between two parties. One loans money to the other, who promises to pay it back with interest, and guarantees it with a hunk of real estate. Walking away, at least in most cases, is not violating the contract. Break out your mortgage documents, and I suspect you will find, like on mine, a large hunk of legalese which dictates the terms of the contract, and what happens if you don’t pay. A mortgage is a secured loan, backed up by real estate. In the event of a failure to pay, there is a part of the contract which gives the house back to the mortgage holder. This is designed to make the lender whole. Depending on the state, it could be easy or difficult to accomplish; but in the end the house is the security to protect the company making the loan. In Maryland the lender has the opportunity to pursue a deficiency judgment if the balance of the mortgage exceeds the value of the property (in non-deficiency states the lender may not be able to pursue the deficiency; but this is an agreed to risk when the loan is made). The lender can also forgive the debt, or work out some other arrangement with the borrower. Personally, I’m hoping for forgiveness on any deficiency with the first, and a settlement agreement with the second. Just like when companies renegotiate contracts with each other, it is all business.

[As a side note, I sometimes wonder if any of the people who complain about a violation of a contract are divorced. After all, marriage is a contract that is also all too often renegotiated and canceled.]

As to walkers being responsible for falling housing prices, the economy, dieing neighborhoods, etc., cause and effect can be argued (I will likely do this later); but the responsibility seems clear. We are all responsible for the well being of ourselves and our families. It is not anyone’s responsibility (not even the government’s) to provide for someone else’s happiness or financial security. This is the price of a free society.

I made some bad financial choices like millions of other Americans (and presumably, residents of other countries as well), and I am paying a personal and financial price for it. The bank took a calculated risk when lending me money on the house, and they will end up paying a financial price for that risk as well. But from both a contractual and a societal standpoint I feel morally clean.