I published my article, “It May Be Financially Irresponsible to Pay Your Mortgage” on January 11th.

The point is made that the mortgage is a business decision and a business contract is signed. The bank agreed upon the collateral (the house) and made the risk based on its own assessment of the collateral value. The mortgage contract is honored during a strategic default when the homeowner turns over the keys and walks away. Outside of any special contract spelling out additional obligations, there is no moral obligation to stay in the contract. There is not a moral question inherent in the contract.

During the bubble, the banks helped to perpetuate the boiling cauldron with their lack of underwriting standards, fraudulent loan devices, and their failure to properly assess the environment in which they were adding billions in loans to their balance sheets. They were taking exorbitant and asinine long-term risks. These banks became inebriated on the enormous here-and-now profits so they could pay out outrageous bonuses to their reckless risk takers and debt pushers. The banking system melted down, in part, because of the problems perpetuated by the very banks that are now suffering form the foreclosure-o-rama. Bad business decisions were made all around, leading, in part, to the mass collapse of banks on Wall Street and Main Street.

Yet I received tons of hate mails from financially illiterate folks who failed to read what I wrote in my article. They read right past what I clearly stated. We can thank the public schools for turning people into collective herds of non-thinking, emotionally-driven folks who cannot get past the first image that floats into their minds. As one commenter said on my blog, you cannot present “logical arguments to a society that is emotionally-driven. The mob is emotional, not rational; a free market can absorb this, since irrational players are marginalized (they go broke), but a democracy subsidizes irrational behavior. … The Great Society was one of the more cynically successful human engineering projects in history, it changed an entire society from independent to dependent.”

On January 16th, Mike Shedlock weighs in on the “walking” question. Mish cites Henry Blodget, who discussed this issue on Aaron Task’s show. An important question is asked during this discussion (see the video): why are homeowners held to higher standards than the banks?

Blodget says:

Is it okay to walk away from your mortgage for no other reason that it doesn’t make financial sense to keep throwing your hard-earned money away?

There’s no universal answer here, but in most cases, the answer is “Yes, it’s okay to walk away.” Importantly, the reason is not that “Wall Street deserves it” or “We’ve got to teach the banks a lesson” or any of the other retribution logic being thrown around these days.  The reason is that you and your lender engaged in an arms-length transaction in which both parties balanced competing interests and spelled out their obligations in a clear, signed contract. And unless that contract states that you have a “moral obligation to pay,” you don’t have a moral obligation to pay.

Blodget then makes an important point (that people can’t seem to get through due to the public schooling that blocks their access to critical thinking skills):

Now, compare this to a situation in which you DO have a moral obligation to pay: When you borrow money from a friend at no interest, for example, and you promise that friend that you will give him or her every penny back. THAT is a moral obligation to pay. In this case, your friend did not lend you money to make a profit. Your friend loaned you money to help you out–with no collateral or contract other than your promise to pay.

Shedlock adds a point that I made in my article about special interests and federal mouthpieces, and their role in perpetuating the lies. They do this because it is to all of their benefit to keep you tied up in the housing mess in debt slavery, doing your “patriotic duty” and bearing the burden of financial ruin in order to stay guilt free and in good moral standing. He states:

Banks made a poor business decision and so did you (if you are considering walking away), and there are consequences on both sides. Banks, Realtors, the Obama Administration, and credit lenders are engaging in an all out campaign to get people to honor “moral obligations” that simply do not exist.

If you are in trouble, don’t fall for this moral obligation nonsense. Indeed, if there is a moral obligation here, it ought to be for lenders to stop spewing lies about moral obligations.

I got tons of emails calling me an immoral $#!*&%@#* and a #!@*&%$ for saying that #!^&*#, and for writing about rationally assessing one’s financial condition and determining that there is an objective answer in such a financial analysis. These hate mailers could not see through their rancid hate long enough to assess the objective financial point I was making, or the reality of the (general) mortgage contract. (I will be posting some of these emails on my website soon.)

The most deranged email came from a long-time reader – who has been writing me favorably for years – who claimed I wrote the article for no other purpose than me, because I am a defaulter. Than he proceeded to compile a whole paragraph counseling me on my moral obligation! His crystal ball must need some major maintenance work, because if I’m defaulting on my mortgage, it’s news to me! I guess while I had the basement waterproofing and electrical done last month, my evil twin was out strategically defaulting on my mortgage. (If anybody has seen her, please report it to my hotline.)

Karl Denninger, who is great on so many issues, wrote on October 30th (“Stop Paying Your Mortgage Today):

You’ve already been taxed to the tune of $700 billion for a bailout for the bankers, even though you told Congress “no”.

Now the FDIC and Treasury are “working on a plan to curb foreclosures.”

In return I recommend that every American with a mortgage immediately stop paying.

…Consult with an attorney and CPA, in the same room before you act to make sure your specific mortgage (and the state in which you live) is a “non-recourse” loan and to understand exactly what impact this will have on you (it will come with a significant impact, most specifically to your credit rating!  Hear me out – you may find that this course of action makes perfectly good sense.)

…But it would appear to me, at this time, that this is the only way you can recover at least some of the tax burden that you have been thus far and will be in the future assessed for our government’s idiocy and pernicious theft of taxpayer dollars.

Read his whole article.