View Poll Results: Is there a moral obligation to repay money you borrow?

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  • If you borrow money, you are morally obligated to repay it.

    110 34.48%
  • I feel no moral obligation to repay loans I've taken out

    209 65.52%
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Thread: Are you morally obligated to repay a loan that you take?[W:461]

  1. #671
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    You signed a promise to pay. You didn't sign a promise to do whatever suits you best.
    The bank also signed a promise, that their money was protected by the collateral you give them. They got the appraisal and they agreed to the amount of their loan based on that appraisal. Otherwise why do we give them that collateral?

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    You signed a promise to pay. You didn't sign a promise to do whatever suits you best.
    I signed a promise to pay AND that promise (the loan document) contemplates default and provides the lender with legally enforceable remedies in case of default. What I agreed to was those terms. Nothing more.

    I'm not sure what's hard about this - the lender has an obligation to shareholders to "do whatever suits it best" in that transaction. Why should I be bound by a higher "moral" standard? Answer is I'm not.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by iliveonramen View Post
    Actually you are right, I should of been using amoral, not immoral. I've been in airports all day and distracted. Businesses are amoral, they act in an amoral environment, as you should as well.


    A business has the duty to follow the law and act in the best interest of it's shareholders...that's it.
    Quote Originally Posted by Papa bull View Post
    With business, it is called ethics.; doing the right thing. Not following through on your agreements is unethical/immoral. Call it whichever you wish but it is wrong.
    Interesting exchange. A teachable moment if you will. In an interview last week, the dean of the Harvard Business School made reference for Charlie Rose the three lenses they teach people to use: Economics, Legality, and Ethics. The apparently now have an oath they want graduates to take, but some people refuse to sign the oath.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by iguanaman View Post
    The bank also signed a promise, that their money was protected by the collateral you give them. They got the appraisal and they agreed to the amount of their loan based on that appraisal. Otherwise why do we give them that collateral?
    Incorrect again. The bank did not sign a promise.

    Do yourself a favor. Google "Fannie Mae 3200" which is the industry standard multi-state note that is signed by borrowers whose loan is written to Fannie standards (as almost every conventional mortgage in this country is). You will see this at the top of the Fannie Mae 3200:

    1. BORROWER’S PROMISE TO PAY
    In return for a loan that I have received, I promise to pay U.S. $_________________________ (this amount is called “Principal”), plus interest, to the order of the Lender. The Lender is ______________________
    _______________________________________. I will make all payments under this Note in the form of cash, check or money order.
    I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the “Note Holder.”


    The bank is not promising anything. Why on earth do people who know exactly zero about mortgage lending posts things like this?

    I'll educate you a little more here. The end of this standard note, before the borrowers' signatures, says this:

    10. UNIFORM SECURED NOTE
    This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the protections given to the Note Holder under this Note, a Mortgage, Deed of Trust, or Security Deed (the “Security Instrument”), dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note. Some of those conditions are described as follows:

    If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.

    If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.


    There is no promise to take your house if you default. When you sign an agreement for a mortgage with a lender, you are, exactly as the note says, promising to pay. You, the borrower. The bank is not promising anything except agreeing to follow the laws it must follow in the event you default on your promise to pay.
    Horse sense is the thing a horse has which keeps it from betting on people. ~W.C. Fields

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    But defaulting on a loan isn't any of those - it's not a lie, not cheating, and you're not stealing. You signed a contract and the contract contemplates default and provides remedies to the lender. If you entered into the contract in good faith, honestly answered the questions, told the truth about your earnings, etc. then you've fulfilled your moral obligation.

    We own some rental property, and our tenants sign a lease with terms. What I know is the very second it's in their best interests to break the lease and pay the remedies in that lease in the event of default, they'll do it and I'll wish them well. It happens all the time, and I honestly have no hard feelings. They need more space, we don't have it, they don't like the location - whatever. It's business. I broke leases in my younger life - I moved cities and so paid the fees required by the lease. That's not immoral. Moving out in the middle of the night is...
    Paying fees required when you break a lease is not the same thing as defaulting on a mortgage. You paid your obligation.

    I don't subscribe to the idea that there is morality in lending, but technically this statement isn't quite accurate:

    If you entered into the contract in good faith, honestly answered the questions, told the truth about your earnings, etc. then you've fulfilled your moral obligation.


    If you default on your loan because you made bad business decisions or were not a good steward of your own money or you made bad personal decisions, then you haven't fulfilled your "moral obligation" (whatever exactly that may be by definition) just because you were honest in the application process.

    I think if I was going to attempt to apply any morality to lending it would be to remind people that provisions for bad loans, and charge offs, and repossessions, and foreclosures, etc. end up costing everyone. Those moneys don't just get written off with a shrug of the shoulders. We all end up paying.
    Horse sense is the thing a horse has which keeps it from betting on people. ~W.C. Fields

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    Then I have to call bull rap on claims that you would be admonished if default rates weren't high enough.
    there was no admonishment. there was course correction, such that those loans we were on the fence about would be given a 'yes' instead of a 'no'; that was because our low default rate indicated we had historically been too conservative in our creditworthiness evauations

    Loan defaults were the fuel for the economic crisis and people that think like you made it all possible.
    no. loan defaults were the RESULT of poor financial management
    it was the mismanagement by the financial sector and weak governmental oversight that LED to the defaults

    You gamble on a home purchase figuring it will always go up in value.
    not the approach of an astute person
    there is always the chance for market corrections, even to the point that values may deflate instead of increase
    but one must be alert to look for signs of them
    as a real property appraiser prior to entering government service, i was better positioned than many, such as yourself, to gauge the economic winds

    You find out you're wrong.
    no. i correctly anticipated the recession and took steps to secure my portfolio and that of my employer

    You screwed up and make everyone else eat your mistake.
    no. i did not screw up. when the financial game of musical chairs ended, i was sitting down
    it was those financial neophytes such as yourself who were left to eat the accrued losses

    That's why we ended up with the economic crisis.
    we ended up in economic crisis because of limited financial understanding and weak governmental oversight of the financial industry

    Thanks to all the people that think like you.
    i didn't get hurt. in fact, i got well. but it was people like you who were so afraid they were going to miss the rising financial tide that their greed caused them to select bad investments

    You must be proud.
    i am
    that i was able to forecast what was coming and adequately secured myself and my family. i also attempted to better secure my employer, one i had only recently turned around after an episode of embezzlement. the new CEO ignored my admonitions because, like others of you, he was afraid he was going to miss out on profits if we significantly adjusted our portfolio. i wrote a memo explaining the basis of my concerns, encouraging him to discuss my assessments with the board before i departed. he opted not to, and was soon without a job after the crash, the board having learned that he chose to keep them in the dark about his decision
    we are negotiating about dividing a pizza and in the meantime israel is eating it
    once you're over the hill you begin to pick up speed

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by iliveonramen View Post
    Okay...the fact you're frightened is interesting.
    One only has to use thinking skills to understand.

    It's like saying cancer is no different than a pimple because they are both treated with medicine.

    He has minimized the seriousness of defaulting on mortgages, and some idiots will read it and say "Eh, no big deal....it's just like me not picking up Sally at preschool at 3:00 instead of 4:30". Unreal.
    Horse sense is the thing a horse has which keeps it from betting on people. ~W.C. Fields

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by tres borrachos View Post
    Paying fees required when you break a lease is not the same thing as defaulting on a mortgage. You paid your obligation.

    I don't subscribe to the idea that there is morality in lending, but technically this statement isn't quite accurate:

    If you entered into the contract in good faith, honestly answered the questions, told the truth about your earnings, etc. then you've fulfilled your moral obligation.


    If you default on your loan because you made bad business decisions or were not a good steward of your own money or you made bad personal decisions, then you haven't fulfilled your "moral obligation" (whatever exactly that may be by definition) just because you were honest in the application process.

    I think if I was going to attempt to apply any morality to lending it would be to remind people that provisions for bad loans, and charge offs, and repossessions, and foreclosures, etc. end up costing everyone. Those moneys don't just get written off with a shrug of the shoulders. We all end up paying.
    That's the thing. When someone decides that they aren't going to accept the loss in value of the home they purchased and walk out to leave the bank to try to collect, what happens is that the bank typically will only get some of the money back. There is a loss involved and this is a loss INCURRED by the borrower which he then THRUSTS upon the lender. Instead of losing his own money, the homeowner transfers his loss to the owner of the mortgage. He makes OTHERS pay for HIS mistake or carelessness. The whole country paid for these mortgage defaults. People complaining that they haven't had any raises because of the recession... people who lost their jobs because of the recession.... people who's families suffered because of the recession.... 401K's that went into the crapper.... Lots of people ended up paying because these people were deadbeats and being a deadbeat and sticking other people with your bills certainly deserves to be called "immoral".
    You can't reason anyone out of a position they didn't reason themselves into in the first place.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    I signed a promise to pay AND that promise (the loan document) contemplates default and provides the lender with legally enforceable remedies in case of default. What I agreed to was those terms. Nothing more.

    I'm not sure what's hard about this - the lender has an obligation to shareholders to "do whatever suits it best" in that transaction. Why should I be bound by a higher "moral" standard? Answer is I'm not.
    The fact that there are enforceable remedies if you default does not make the promissory note anything BUT a promise to pay. The fact that the police will go after you if you rob a liquor store isn't an unspoken agreement that it's OK to rob the liquor store. The fact that collectors come after you if you don't pay a loan isn't an unspoken agreement that it's OK not to pay back the money you borrow.

    The lender is obliged to do precisely what it says it will do in the contract. And the lender actually DOES. If the lender makes good on it's contractual obligation but you do not, the lender is more moral than you are and pretending that there's any other way to look at it is blatant selfing.
    You can't reason anyone out of a position they didn't reason themselves into in the first place.

  10. #680
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    That's the thing. When someone decides that they aren't going to accept the loss in value of the home they purchased and walk out to leave the bank to try to collect, what happens is that the bank typically will only get some of the money back. There is a loss involved and this is a loss INCURRED by the borrower which he then THRUSTS upon the lender. Instead of losing his own money, the homeowner transfers his loss to the owner of the mortgage. He makes OTHERS pay for HIS mistake or carelessness. The whole country paid for these mortgage defaults. People complaining that they haven't had any raises because of the recession... people who lost their jobs because of the recession.... people who's families suffered because of the recession.... 401K's that went into the crapper.... Lots of people ended up paying because these people were deadbeats and being a deadbeat and sticking other people with your bills certainly deserves to be called "immoral".
    You are correct. People think that money charged off by their credit card company seems to disappear into the atmosphere. It doesn't. It gets passed on to the rest of the cardholders. Same thing with the mortgage defaults, and commercial loan defaults, and personal unsecured loan defaults, and so on.

    Defaulting on a loan is a bad thing for everyone. It surprises me how many people in this thread seem to think it's no big deal. It is.

    What people also don't realize is that it is very hard to get credit anymore as a consumer unless you have very good credit. People run into hardships - job losses, medical, kids issues, etc. that cause them to have a bump in their lives. That stays with you, no matter what the reasons. And because of the irresponsible borrowers, the standards that the lenders are expected to maintain have become much higher.
    Horse sense is the thing a horse has which keeps it from betting on people. ~W.C. Fields

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