The Double Standard Of Stategic Defaults - OK For Businesses, Unethical For Homeowners, Say Financial Industry Apologists
- In the business world, strategic default is a common tactic - considered a savvy move for financially troubled companies. However, "consumers have been browbeaten and trained to believe that it's not honorable to not pay your debts," said Margery Golant, a Boca Raton attorney who represents the Pompano Beach couple in default. "Why should it be any different for consumers?"
- Last year, Morgan Stanley walked away from a $1.5 billion mortgage on five buildings in San Francisco despite record-breaking profits in 2009.
- Real estate giant Tishman Speyer Properties strategically defaulted on $4.4 billion in loans on two housing developments in New York after the properties lost $2.2 billion in value. The company had billions of dollars in assets, including Rockefeller Center and the Chrysler Building, which it could have leveraged to meet its loan obligations.
- Even the Mortgage Bankers Association, whose president chastised homeowners who strategically default for the "message" it would send to their "family, kids and friends," dumped its Washington headquarters in a short sale. After working out a deal with its lender, the MBA sold the building for $41.3 million last year. In 2007, the group purchased it for $79 million .
- "No, it's not wrong," said Randy Cohen, author of the weekly Ethicist column in The New York Times. Although homeowners are emotionally attached to their property, a house is still an investment. "I don't understand why you would be asked to make a decision on this investment any differently than you would on any other," Cohen said. "Why should homeowners be held to a higher ethical standard?"
For the story, see Some homeowners, who can afford the mortgage, still default as a strategy.
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