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Home Underwater? Ethical Considerations

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The University of Arizona’s Eller College of Management sponsored an ethics symposium on August 20 for about 75 executives and others. The main point of the symposium was to discuss whether it is moral/ethical for a consumer living in an upside down home to simply walk away from it or “strategically default”. Then, after walking away to take advantage of the various laws protecting the consumer from deficiency balances and taxes.

See the Inside Tucson Business article here.

As stated in the article, most consumers do not walk away from upside down homes, even when it is makes financial sense to do so. I get the sense from the article (I didn’t attend, don’t like the UoA…go devils!) that the experts are a bit surprised by this.

The surprise is I believe, based on the following line of thought:

1. The consumer has limited options because he is fenced in by his own ethical sense of obligation to pay his debt
2. The banks are only fenced in by their drive for profits and fear of losses.

3. The burdens of this whole thing fall unfairly on the consumer as a result…something about the loss of bargaining power.

4. For this reason, and because the lender knew the buyer would or could default, it can’t be unethical for the consumer to simply walk.

Got it? Ethics don’t or shouldn’t exist in this scenario. The bank doesn’t use it, neither should the consumer.

The fact that most consumers do not always adopt this line of reasoning and simply walk away doesn’t surprise me though.

It doesn’t surprise me because humans are complex, and they do, at least in my experience, continue to maintain a sense of guilt often complicated by severe bouts of “ethics”.

We make decisions as a result, in a complex manner. A manner based on our own sense of right and wrong, not only based on our financial situation.

Really though…don’t we sometimes just like our home and it would cost just as much to rent… so we stay?