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

Is there a moral obligation to repay money you borrow?

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

    Votes: 91 92.9%

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

    Votes: 7 7.1%
  • Total voters
    98
justabubba said:
once again exhibiting that you know nothing about what you are posting
we packaged and resold no loans
my agency provided a source of capital when much of the rest of the economy was illiquid
but getting back to the thread topic: nothing about those loans that went into default was immoral
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Then I have to call bull rap on claims that you would be admonished if default rates weren't high enough. Loan defaults were the fuel for the economic crisis and people that think like you made it all possible. You gamble on a home purchase figuring it will always go up in value. You find out you're wrong. You screwed up and make everyone else eat your mistake. That's why we ended up with the economic crisis. Thanks to all the people that think like you. You must be proud.
 
Papa bull said:
And that article got a lot of well deserved criticism because it IS immoral to do a "strategic default". Quoting someone that agrees doesn't make your case. I posted one from the NYT that explains why the article you posted is actually promoting immoral and unethical behavior.
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No, he points out the law and that mortgage is a contract that includes penatlies for breach of contract. He actually answered this question
That is false. The agreement is to pay it back. Period. The fact that the bank stipulates what actions will be taken against you if you renege and don't pay is not to be construed as an an option that is offered. If you want to argue that the agreement states "either/or" then post the exact wording that states that you can stop paying before the mortgage has been satisfied.
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tres borrachos said:
That is actually frightening that a law student is comparing defaulting on your cell phone contract or defaulting on your promise to pick up your toddler early from preschool with defaulting on your mortgage. It's also frightening that it's been posted on here.
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Really? It's "frightening"? Was it "frightening" when Morgan Stanley walked away from a 1.5 billion dollar mortgage because the building lost their value while the company was receiving massive profits? So it's frightening that individuals act in their own self interest...like a corporation would?

Morality has nothing to do with borrowing and lending. But to make that case by pretending it's no different to default on your mortgage than to your cell phone provider or your toddler at preschool is absurd. And some idiotic people will probably believe it.
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By all means, explain the difference between a breach of contract and specified penalties between both? There's more money involved...that's it.
 
Papa bull said:
I don't think you understand morality. What moral duty do "we" have to the poor and sick?
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Fundamentally, it seems to me that most liberals believe that helping the needy is the most fundamental aspect of morality. That's what "good" is to us- helping the less fortunate.

The the right, it seems like "morality" is more like "obedience" or "loyalty" or something similar. Conservatives are instinctively rule-followers, so they've created notions of morality that are centered around obedience.

Really, it isn't that one concept is right and the other wrong. It is just how we were raised I guess. But, I would suggest that you just play it through in your head. Is a world where people are more subservient to the powerful really a better world? Wouldn't a world where the needy suffered less be a better world? It just doesn't really compute for me how you could not see that. But, yeah, I guess mostly it is just how we were raised. Liberal parents praise their kids when they help out the kid that's getting picked on, conservative parents praise their kids when they sit quietly during church, and sooner or later, we think those things are the most important things I guess.

Papa bull said:
And how do you know what all the conservatives believe?
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This isn't the first time I've talked with a conservative. You guys don't hide it. But, hey, let me just ask you if you think I'm incorrect- do you believe that you have a moral duty to help the poor and sick?
 
justabubba said:
once again exhibiting that you know nothing about what you are posting
we packaged and resold no loans
my agency provided a source of capital when much of the rest of the economy was illiquid
but getting back to the thread topic: nothing about those loans that went into default was immoral
Click to expand...

Yes and no (to your last statement). There was a lot of impropriety among the borrowers. Many lied about their income (especially the ones who got the no doc loans). Many bought houses that they should not have bought. Someone with an income of $50,000 per year should not be going into a $500,000 house, no matter how "easy" the lender made it for them to do. So there were some improprieties all around. Lying about income definitely isn't moral, and you could make the argument that people who overextended themselves, and thus became a drain on the rest of us, also acted immorally (depending on your definition of moral).
 
tres borrachos said:
Not true. The agreement is not that you either pay it back or the bank seizes the asset. The agreement is that you pay it back...period. The collateral is what you pledge to ensure that the lender is covered in the event that you default on your loan. A loan contract is your promise to pay.
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A loan contract is a contract...which includes that amount you should pay as well as any penalties for breach of contract. That's it...it's a black and white document. There's no morality written into it and the bank is not operating off of morality.
 
iliveonramen said:
Really? It's "frightening"? Was it "frightening" when Morgan Stanley walked away from a 1.5 billion dollar mortgage because the building lost their value while the company was receiving massive profits? So it's frightening that individuals act in their own self interest...like a corporation would?


By all means, explain the difference between a breach of contract and specified penalties between both? There's more money involved...that's it.
Click to expand...

Yes, its frightening. There is no comparison to defaulting on your mortgage and not picking up your toddler at preschool. And it's scary that someone tried to draw the comparison.
 
iliveonramen said:
A loan contract is a contract...which includes that amount you should pay as well as any penalties for breach of contract. That's it...it's a black and white document. There's no morality written into it and the bank is not operating off of morality.
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No, a loan contract is a promise to pay. It isn't a "either I pay or you take the collateral" agreement. I never said there was any morality in it.
 
iliveonramen said:
Immoral is just a term stating that the entity doesn't act based on morality. Business operates and only acts in it's best interest. I'm not sure how stating a fact and then acting in the same fashion when dealing with a business is hypocrisy.
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It would be immorality. I wasn't sure which you'd go with (immorality or hypocrisy) But immorality it is, then. If you act as a business, you are just as immoral as they are. You call them immoral. You say you would behave Luke they do. That means that you, too, must be immoral.

I think a business has a duty to act morally. Business has a duty not to lie, cheat or steal. It has a duty to be honest. These are moral obligations. Some fail to act morally. Others are quite good at eschewing immoral behaviors and practices. A business absolutely can be immoral. A brothel is an immoral business. But even businesses that are not immoral CAN engage in immoral and unethical practices.
 
Papa bull said:
That is false. The agreement is to pay it back. Period. The fact that the bank stipulates what actions will be taken against you if you renege and don't pay is not to be construed as an an option that is offered. If you want to argue that the agreement states "either/or" then post the exact wording that states that you can stop paying before the mortgage has been satisfied.
Click to expand...

It's really not the agreement. When I signed that inch think set of documents, I simply agreed to be bound by what was included in that set of agreements - nothing more. And that agreement contemplates default, and provides the lender very specific remedies in the case of default. It's a business transaction, not a moral one, and both sides to that transaction will do (or can do without violating some moral mandates) EXACTLY what is in their financial best interests to do.

If you miss ONE credit card payment, is it 'moral' for the credit card company to jack your APR to 100%. Not IMO, but if they can they will do it without blinking an eye, because it's part of the agreement you signed. It's just ludicrous for one side of a transaction to be bound by some moral duty when we all know the other side is motivated entirely by maximizing profits, period.

And you would demand that a CEO of one of your investments take the 'immoral' action of strategic defaults if that CEO determined it was in your best interests as shareholder. He would and probably should be fired if he or she put some 'moral' duty ahead of his obligation to shareholders to maximize returns.

Lots of people have said that if the loan was with a person, the rules change. That's correct IMO because most of those loans (or at least as I contemplate them) are "secured" only by our word as ethical people. In those cases, I'd go to great lengths to repay the loan because nothing but our individual morality secures the loan - that is the security I provided.

The very short answer is for loans, like all business transactions, I expect the golden rule to apply. How do I expect the other side to treat me? My last mortgage was with a massive loan subsidiary of one of the Wall Street banks. I KNOW what their approach is to morality in business....HAHAHAHAHAHAHAHAHAHAHAHAHAHA...LMMFAO!!!! Where's my bonus!!!
 
Re: Are you morally obligated to repay a loan that you take?

iguanaman said:
Only if you have not given the borrower collateral that you return in lieu of payment. A borrower should never be responsible for the loss a lender may sustain because they took insufficient collateral or the collateral has lost value. That is on them.
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That's very ****ing unethical and almost shameful.

But hey, go ahead, the your credit tanks and no one will ever loan to you again.

If you flip the finger to the world the world will flip the finger right back at you.
 
Papa bull said:
I think a business has a duty to act morally.
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Incorrect. A business has a duty to make as much profit as possible for its stakeholders while acting within the law, period. If a business gains a reputation for cheating or dishonesty, it's likely to lose customers and damage its profitability, but that's the ONLY driving force.
 
tuhaybey said:
Fundamentally, it seems to me that most liberals believe that helping the needy is the most fundamental aspect of morality. That's what "good" is to us- helping the less fortunate.

The the right, it seems like "morality" is more like "obedience" or "loyalty" or something similar. Conservatives are instinctively rule-followers, so they've created notions of morality that are centered around obedience.

Really, it isn't that one concept is right and the other wrong. It is just how we were raised I guess. But, I would suggest that you just play it through in your head. Is a world where people are more subservient to the powerful really a better world? Wouldn't a world where the needy suffered less be a better world? It just doesn't really compute for me how you could not see that. But, yeah, I guess mostly it is just how we were raised. Liberal parents praise their kids when they help out the kid that's getting picked on, conservative parents praise their kids when they sit quietly during church, and sooner or later, we think those things are the most important things I guess.



This isn't the first time I've talked with a conservative. You guys don't hide it. But, hey, let me just ask you if you think I'm incorrect- do you believe that you have a moral duty to help the poor and sick?
Click to expand...

I think we have a civic duty to help the poor and sick. Moral duties are to eschew wrong or "bad" acts. Immorality is "doing wrong". Apathy is "doing nothing". But I've said before and personally that I believe welfare is a necessary evil because letting people starve in the streets when we have the means to provide food would be immoral as a society.
 
JasperL said:
It's really not the agreement. When I signed that inch think set of documents, I simply agreed to be bound by what was included in that set of agreements - nothing more. And that agreement contemplates default, and provides the lender very specific remedies in the case of default. It's a business transaction, not a moral one, and both sides to that transaction will do (or can do without violating some moral mandates) EXACTLY what is in their financial best interests to do.

If you miss ONE credit card payment, is it 'moral' for the credit card company to jack your APR to 100%. Not IMO, but if they can they will do it without blinking an eye, because it's part of the agreement you signed. It's just ludicrous for one side of a transaction to be bound by some moral duty when we all know the other side is motivated entirely by maximizing profits, period.

And you would demand that a CEO of one of your investments take the 'immoral' action of strategic defaults if that CEO determined it was in your best interests as shareholder. He would and probably should be fired if he or she put some 'moral' duty ahead of his obligation to shareholders to maximize returns.

Lots of people have said that if the loan was with a person, the rules change. That's correct IMO because most of those loans (or at least as I contemplate them) are "secured" only by our word as ethical people. In those cases, I'd go to great lengths to repay the loan because nothing but our individual morality secures the loan - that is the security I provided.

The very short answer is for loans, like all business transactions, I expect the golden rule to apply. How do I expect the other side to treat me? My last mortgage was with a massive loan subsidiary of one of the Wall Street banks. I KNOW what their approach is to morality in business....HAHAHAHAHAHAHAHAHAHAHAHAHAHA...LMMFAO!!!! Where's my bonus!!!
Click to expand...

You signed a promise to pay. You didn't sign a promise to do whatever suits you best.
 
Papa bull said:
It would be immorality. I wasn't sure which you'd go with (immorality or hypocrisy) But immorality it is, then. If you act as a business, you are just as immoral as they are. You call them immoral. You say you would behave Luke they do. That means that you, too, must be immoral.
Click to expand...
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.

I think a business has a duty to act morally. Business has a duty not to lie, cheat or steal. It has a duty to be honest. These are moral obligations. Some fail to act morally. Others are quite good at eschewing immoral behaviors and practices. A business absolutely can be immoral. A brothel is an immoral business. But even businesses that are not immoral CAN engage in immoral and unethical practices.
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A business has the duty to follow the law and act in the best interest of it's shareholders...that's it.
 
DifferentDrummr said:
Incorrect. A business has a duty to make as much profit as possible for its stakeholders while acting within the law, period. If a business gains a reputation for cheating or dishonesty, it's likely to lose customers and damage its profitability, but that's the ONLY driving force.
Click to expand...

We have to disagree on this. What you do in business is a reflection on you and you certainly can be immoral in your business practice. Although, in business, it tends to be called "ethics". Lying, cheating and stealing. Unethical, immoral... Just plain wrong. Wrong for business. Wrong for you. Wrong for me.
 
Papa bull said:
It would be immorality. I wasn't sure which you'd go with (immorality or hypocrisy) But immorality it is, then. If you act as a business, you are just as immoral as they are. You call them immoral. You say you would behave Luke they do. That means that you, too, must be immoral.

I think a business has a duty to act morally. Business has a duty not to lie, cheat or steal. It has a duty to be honest. These are moral obligations. Some fail to act morally. Others are quite good at eschewing immoral behaviors and practices. A business absolutely can be immoral. A brothel is an immoral business. But even businesses that are not immoral CAN engage in immoral and unethical practices.
Click to expand...

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...
 
Re: Are you morally obligated to repay a loan that you take?

WCH said:
You can repay someone $1 at a time.
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Not everyone will accept $1 at a time (and your late fees usually would put you so far in the hole doing that, you are better off being sent to collections anyways).
 
iliveonramen said:
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.
Click to expand...

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.
 
Papa bull said:
You signed a promise to pay. You didn't sign a promise to do whatever suits you best.
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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?
 
Papa bull said:
You signed a promise to pay. You didn't sign a promise to do whatever suits you best.
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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.
 
iliveonramen said:
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.
Click to expand...

Papa bull said:
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.
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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.
 
iguanaman said:
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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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.
 
JasperL said:
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...
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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.
 
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