The morality of walking away from your home.

For over a year I’ve been providing clients an hour long “primer” on foreclosure and the risks in walking away from a home that is underwater. What strikes me in almost every case is the client’s strong sense of ethics/values/morals surrounding homeownership and ability/obligation to pay. Brent White, a University of Airzona law professor has written a book called Underwater Home: What Should You Do if You Owe More on Your Home than It’s Worth? which lays out the case for and against walking away from an upside-down mortgage where the home is worth less than the mortgage balance. Mr. White strips away the moral issues embroiled in the decision to keep paying on a home that you can’t afford. Mr. White states:

I think it‘s OK to stop paying the mortgage long before you clean out your savings, sacrifice your retirement, spend your children‘s college fund, and certainly before you have to start using your credit cards to survive. Before you do any of those things, I think the more moral course is to stop paying your mortgage. Indeed, I think it‘s morally acceptable to default if your mortgage threatens your ability to save adequately for the future, regardless of whether you can pay it according to some arbitrary definition of “affordability.” It may be more responsible to put the money saved from giving up your home and renting instead into an investment account, so that you are secure in retirement. Or put it into a college fund, so that you can give your children a chance at a higher education.

Certainly food for thought.