At first, I dismissed the idea of a short sale. Late that summer, I sat down with a really close friend in Las Vegas, someone I looked up to. He cut to the heart of the matter right away: Why, he wanted to know, were we still making the payments?
Because I have a moral obligation, I said. You pay your debts.
He proceeded to explain that I didn’t have a moral obligation to the bank. I had a moral obligation to my family. I had a contractual obligation to the bank, along with a clear moral obligation to be honest in my dealings. What he was asking was this: Which is more important? Your contractual obligation to the bank or your obligation to your family to preserve your ability to make a living?
I had never thought of it that way. But it made sense. I summed it up to myself like this: I have a contractual obligation to the bank (as well as a moral obligation not to skirt the consequences of breaking it: losing my house and wrecking my credit score). But my moral obligation to my family trumps the contractual obligation to the bank.
Cori and I thought about this for months, but we finally decided to let the house go and stop making payments so we could pursue a mortgage modification or a short sale. The fact was, we didn’t have a choice. We simply couldn’t afford it.
I remained troubled by the ethical implications of what I was doing, but I soon started seeing some of my friend’s arguments echoed in the work of Brent T. White, a law professor at the University of Arizona. He and others were arguing that homeowners should act more like companies — taking into account legal and economic reasons for stopping a regular payment rather than “perceived moral obligations.”
That was reassuring in the dead of night while I sat in front of the computer trying to make sense of the world financial markets and my own personal situation. I remember being relieved at discovering a way to frame my decision.
But we didn’t know what would happen in the harsh light of day, and we were scared to death. Would we be kicked out of our house? What would the neighbors think? What would the children think? We worried about the stress on our relationship and even the survival of our marriage. I felt like a complete failure.