First, a mortgage contract, like all other contracts, is purely a legal docu*ment, not a sacred promise.[14]
Think of it this way: When you got your cell phone, you likely signed a contract with your carrier in which you promised to pay a set monthly payment for two years. Let’s say, though, that two months after you sign your contract, the price of cell phone service drops by half—meaning that the same cell phone service for which you pay $100 a month could be had for $50 with another carrier. You decide that you would be financially better off paying the early termination fee of $300 rather than $100 a month for twenty-two more months of the same service that you can now get for $50.
Would it be immoral for you to break your contractual promise to pay $100 for two years and elect instead to pay the early termination fee? Of course not. The option to breach your promise to pay is part of the contract, as is the con*sequence of breach—a $300 early termination fee. There is absolutely noth*ing immoral about exercising your option to breach, and you’d be financially wise to do so.
Though a mortgage contract is more substantial than a cell phone cont*ract, it’s no different in principle. Like a cell phone contract, a mortgage contract explicitly sets out the consequences of breach.
In other words, the lender has contemplated in advance that the mort*gagor might be unable or unwilling to continue making payments on his mortgage at some point—and has decided in advance what fair compensation would be. The lender then wrote that compensation into the contract. Spe*cifically, the lender probably included clauses in the contract providing that the lender may foreclose on the property, keep any payments previously made on the property, and may opt to pursue a deficiency judgment against the mortgagor if state law so allows.[15]
By writing this penalty into the contract and then signing the contract, the lender has agreed to accept the property and (in most states) the option to pursue a deficiency judgment in lieu of payment. Of course, even in states where they can, lenders frequently don’t pursue borrowers for deficiency judgments because it’s often not economically worthwhile to do so.[16] Nevertheless, that’s the agreement. No one forced the lender to sign—or write—the con*tract,[17] and the lender wouldn’t hesitate to exercise the right to take a defaulter’s house if it were financially advantageous to do so. Concerns of morality or social responsi*bil*ity wouldn’t be part of the equation.[18]
In short, as far as the law is concerned, choosing to exercise the default option in a mortgage contract is no more immoral than choosing to cancel a cell phone contract. The borrower must simply be willing to accept the conse*quences, which, in the case of a mortgage contract, typically include foreclosure and the risk of a deficiency judgment in most states.
Even though the law doesn’t treat breach of a mortgage contract as a moral wrong, it might be argued that one should still keep one’s promises.[19] That’s a fine belief as far as it goes.
But why treat the promise to pay one’s mortgage as any more sacred than any other promise? We break promises all the time when the consequences of fulfilling them become too great—without being considered immoral for doing so.[20] I recently promised my daughter, for example, that I’d pick her up early from preschool. Though I take promises to my children seriously, I had to break this one because an important meeting ran long at work. I had competing obligations and had to make a choice. Though some might quibble with my choice, it wasn’t immoral.