Core Financial Values

Strategic Defaults; Why Do Companies Get to Walk But Homeowners Dont?

Posted on Tuesday, March 9, 2010

Correct companies make decisions like this based for the most part on the financial aspect. Homowners tend to be more emotional decision makers since their home is often more than just an "investment." But incorrect in that companies don't get to just "walk away." If there are guarantors on the loan, the loan is cross defaulted or cross collateralized with other loans or a default triggers other issues, walking away is not quite that simple.
The real question here is what terms did the borrower agree to and the lender rely on in handing over the loan money? If the deal was such that walking away free of other ramifications is an options (whether it be for a company or for a homeowners as is the case in non-recourse states) then so be it. But if the deal was there would be consequences to walking away from the obligations, then that’s what was "bargained for." For companies and homeowners alike the bottom line is about honoring obligations and accepting responsibility for decision and choices made...whatever they may have been.

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