BLOG VIEW: (This week's Blog View is written by David Coster, author of Total Mortgage Services' Total Mortgage Blog. Phil Hall's regular blog will return next week.)
I recently read the result of a poll that had me scratching my head with concern about the future of our nation. No, it wasn't about the presidential election poll – it was a poll conducted by the Zogby Organization that surveyed Americans views on credit and personal finances.
Among the key findings were the following:
- 36% of those surveyed believe it is ‘acceptable’ to have a low credit score. This represents 77 million American consumers.
- 32% of those surveyed believe that borrowers should be permitted to default on mortgages with absolutely no consequences when they owe more on their home than it is worth. This represents 68 million American consumers.
- 17% of those surveyed said that they would exaggerate their income if they felt it would help them obtain credit. This represents 36 million American consumers.
- 13% of those surveyed said that they would walk away from a mortgage if it was for more than the home was worth.
The vast majority of Americans claim that they believe in living up to their responsibilities, yet the sad fact is that the nation is experiencing a significant crisis of responsibility when it comes to the inherent sense of obligation to pay our debts and to deal honestly with creditors.Â
While the reason that a person's mortgage may be underwater may have nothing to do with their own behavior and much to do with the poor behavior of others, this does not create a ‘moral free pass’ to simply choose to renege on contractual agreements. Renegotiation of mortgage terms, forbearance, short-sales, deed-in-lieu arrangements and even foreclosures are all acceptable resolutions to personal housing finance issues, but simply walking away from a debt that you have the ability to repay is unacceptable. Strategic defaults must be discouraged through punitive consequences and must not be dismissed as a sign of the times or the ‘new normal.’
Why? Because if we accept situational ethics – that says the right and wrong of any situation, law or agreement ‘depends’ on the specifics of that situation – then we open our society to potential chaos as we lose the societal glue that comes from shared values and norms. The rule of law and the foundation of unquestioned moral absolutes served us all well for a very long time – until recently, it seems.
Yes, the past few years have been more than rough. While the country has made progress, there is still much more work that needs to be done. Yet despite the challenges, we must not choose the easy or convenient path, particularly when it sacrifices so much of what has made American life so secure in the past and will do so again in the future.