No Worries About “Morality” in Biggest Real-Estate Default in History

see Morality NO Issue in Big Strategic Defaults Of residential property Why Not for Homeowners

No Worries About “Morality” in Biggest Real-Estate Default in History

Posted Jan 25, 2010 11:59am EST by Henry Blodget in Investing, Recession, Banking, Housing

Related: dia, spy, xlf, len, kbh, blk

Over the past few months, arguments have raged about whether it is “immoral” for homeowners to send banks the keys to their houses and walk away from mortgages that it doesn’t make sense to keep paying.

Regardless of which side of this debate you’re on, note that experienced professional real-estate owners don’t even consider this a question.

Tishman Speyer and BlackRock Realty, the owners of the huge New York residential real-estate complex Stuyvesant Town, have decided to hand over the keys and walk away, dumping the property on lenders who provided some $4.4 billion in loans.

Stuyvesant Town is now estimated to be worth less than half of what Tishman and BlackRock paid for it four years ago, but they won’t be feeling much pain.  Tishman put up only $112 million of equity.  Other investors, like California Public Employees’ Retirement System, a Florida pension fund, and the Church of England, as well the boldholders, will eat the rest.

In none of the stories reporting this decision was the question of “morality” ever mentioned.  It was simply assumed, as it always is with corporate transactions, that the parties had reached their agreement at arms length and that default was always a possibility.

It’s no surprise why the mortgage industry tries to convince individual homeowners that they have a “moral obligation” to pay when corporate borrowers don’t — this sense of responsibility and guilt induces more of them to pay.  But it’s not fair.  There are dozens of good reasons not to default on your mortgage, but “morality” isn’t one of them.

3 Responses

  1. & NOW WITH THE SUPREME COURT RULING THAT CORPORATIONS ARE ENTITLED TO 1ST AMENDMENT RIGHTS. I GUESS THE ADVANTAGE OF A NONATTORNEY CORPORATE EMPLOYEE BEING ABLE TO ACT IN A REPRESENTATIVE CAPACITY FOR THE CORP, SAME RIGHT WHICH IS NOT ENTITLED TO AN INDIVIDUAL CITIZEN DESIRING TO ACT IN A REPRESENTATIVE FOR AN IMMIDEIATE FAMILY MEMBER (ALSO A CITIZEN) UNABLE TO AFFORD COUNSLE AND NOT ADEQUATELY EDUCATED IN THE NATURE OF PROCEEDINGS AGAINST HIM. NO DOUBT THIS WILL LEAD TO THE IMPRESSION THAT SINCE CORPS HAVE 1ST AMEND. RIGHTS THEN THEY HAVE ALL OTHER RIGHTS AND EVEN MORE ALL THE WAY TO HAVING RIGHTS TO BE JURORS IN LEGAL CASES THAT RIGHT NOW ARE CONSIDERED TO BE IN “EQUITY”. HOW COULD WE HAVE BEEN SO STUPID TO FORGET THE UNWRITTEN ABSOLUTE UNCONDITIONAL CORPORATE RIGHTS IN THE CONSTITUTION, GOD DON’T WE FEEL STUPID WE SHOULD ALL PERSONALLY APOLOGIZE TO THE CORPS FOR HAVING TO SPEND SO MUCH OF OUR MONEY THEY GOT FROM BAILOUTS AND THE SUPREME COURT AS WELL FOR MAKING THEM WORK SO HARD IN REACHING THE DESCISION ON THAT IS CLEARLY THE INTENTION OF THE FUNDING FATHERS WHEN THEY WROTE THE CONSTITUTION. I JUST HOPE THEY GO EASY ON PUNISHING US, MAYBE “MASTER” WILL BE FOREGIVING AND WE MIGHT NOT EVEN HAVE TO GET LASHINGS, I HOPE WE NEVER MAKE THIS MISTAKE AGAIN……

  2. “Morals” ?? What the hell kind of “morals” did the banks and Wall Street have ?? It’s just so sad that they have most people so brainwashed as to think we’re the bad guys in all of this.

    Steve
    99Libra@gmail.com

  3. THE MORAL THING IS TO MAKE CRIMINALS PAY FOR THEIR CRIME.
    THE IMMORAL THING IS TO DO NOTHING.
    THE MORE MONEY YOU GET OUT OF THESE CRIMINALS THE MORE MONEY YOU TAKE OUT OF THEIR POCKETS AND PUT TOWARDS YOURSELF OR YOUR CHILDREN.
    DO THIS FOR YOUR CHILDREN AND GRAND CHILDREN.
    .DO THIS FOR AMERICAS FUTURE

    GOD BLESS AMERICA

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