a moral obligation to pay

There has been a meme going around for a while that you don't really have a moral obligation to pay your mortgage, because the contract contains embedded options for the lender: you can pay them back, or they can take the house.  I've long thought that this was rather silly.  Go look at your mortgage documents.  You will notice that the contract does not specify any option for you to give them the house in lieu of payment.  The note you signed includes a promise to pay, period.  It also specifies what will happen in the case of breach, but you have specifically promised to avoid breach at all costs.  

Maybe you think there is no moral obligation to keep your promises. Try it in the context of your personal life: it's okay for my boss to stiff me out of that raise they promised, because I can always quit. It's okay for my wife to cheat on me, because I can always get a divorce. It's okay for my roommate to neglect to pay her half of the rent on the first of the month, as long as she's willing to move out. It's perfectly fine for my son to default on that car I cosigned, because the lender has the option to sue me for the balance . . . hey, wait a minute!


"Should We Care if People Don't Pay Their Debts?" by Megan McArdle , The Atlantic. Jun 13 2011, 7:00 PM ET

Update: an interesting exchange between my commenters


Peter Twieg One common variant of this argument that I've run into states that because lenders price default risk into the price of the loan, in the big picture defaulting is simply a fulfilment of their prior expectations and thus not a big deal - your marginal contribution to a higher price is so tiny as to not really be blameworthy at all. Concentrated benefits, diffuse costs..

odinbearded It's funny how close that is to another argument. You know, department stores build a certain loss ratio into their prices so they're not actually losing anything when I take that nice tie.