Anytime I think about the morality of abandoning an underwater debt, I remember that $billion corporations do this every single day.
I read it with just the opposite meaning. I understood it to say that the actual, observed behavior in the mortgage market is that howeowners are being moral. The Fools seem to question why people would act following their morals rather than purely financials.
And this points to one of my favorite misunderstandings of economics, and one that I'm surprised an economist would fall for. Economics is NOT about just money. It's about why people make a choice for one thing, foregoing another. And it's all tied to what people value.
It seems to me that this article validates that people really do value behaving morally, having a clear conscience. And I'm glad, because I don't want to live in the world where people take advantage just because they can.
The article, overall, adds very little to the discussion because it approaches it from the wrong angle.
If you could anonymously walk away from a financial obligation like a morgage, people might behave quite differently.
Before the crash, I was getting calls from lenders trying to get me to do a cash-out refi "so I'd have money to invest in the stock market". I assume that some went for that pitch.
In saying that, in some states, bankruptcy is the only way to cleanly walk away from your home.
"Years ago there was stigma - a man's word was his bond. But that is gone now, and it is not you, the consumer who made it thus. It is in fact the very people who lent you that money who made it so - who proffered documents to you written in 4 point type that were impossible for anyone with less than a PhD to understand (and sometimes even then), that contained intentional tricks and less-than-honest inducements, and who themselves were in fact stuffing bogus loans into securities that they then peddled out to the masses!"
The difference between that and a mortgage is that the big companies are usually on a more equal negotiation footing than homeowners are with banks. So rather than signing a boilerplate agreement, they have teams of lawyers to pick things over, write outs, etc. So when they choose to "walk away", they usually have some reasonable way to do it and still comply with the contract.