The Morality of Jingle Mail: Moral Myths about Strategic Default

Abstract

The recent bursting of the housing bubble led to a wave of defaults on home mortgages. Many, no doubt most, of the defaults are due to an inability to pay. But an increasing number of homeowners are engaging in “strategic default,” that is, they are deciding not to pay their mortgage even though they could afford to pay. In the industry the term “jingle mail” suggests an image of borrowers who mail the keys to the bank and walk away from the house and the mortgage. The moral acceptability of strategic default has been the subject of much discussion in the popular press, the blogosphere, and even in academic circles. In this article I address several arguments that strategic default is morally acceptable, and show why these arguments are lacking.

Keywords: strategic default, contracts, mortgages