Some of those who walk away have no jobs or the banks are not listening to their requests-They are going to foreclose anyway so why not walk away and save yourself eviction!

I'm assuming people who are underwater or don't want to see their home value drop picked no.

Don't point the finger at the people walking away. If you purchased a house that has lost value remember nobody forced you to buy a home and nobody is forcing you to stay other than yourself.

Why would you stay and just pay outrageous interest charges to banks and outrageous taxes to government on a home that isn't anywhere close to what you paid for it? Makes zero sense. Leave and in a few years the same banks who frowned upon your decision to walk away will give you a new loan for a new house b/c that is how they make cash. Reverse the tables gang - WALK AWAY! Your credit score means ZERO. Banks will give you money if they want to make money!

I bought a house in 2006 that I figure I paid about 5-10% too much for, but still can easily afford the mortgage and am nowhere near defaulting. That said, I don't think there is any moral reason for people who are crazy underwater should not walk away. When the bank gave the mortgage they took on the risk of default. If the banks didn't assess risk properly during the bubble, then they deserve the pain. The whole American banking system is actually rotten to the core and filled with moral hazard that originates at the evil Federal Reserve.

I signed a great big contract that says, in effect: pay us back all that money, and a vig, on schedule, or we take the collateral.

So what's wrong with walking away if I find I can't, or no longer want to, pay anything back? The contract gives me the out of losing the collateral. If it's no longer worth what the bank thought it was, well, that's the bank's trouble. This is business, not friendship.

What people are forgetting is it's not as easy as simply "walking" - The bank can 1099 you for the difference still owed and in all but a handful of states they can come after you with a deficiency judgment.

Most lenders are not chasing that money right now due to PR concerns, but give it a year or two. Guaranteed. They will want their money!

A friend of mine who bought in 06 just dumped his house and went through a company called - http://strategicdefaultinformation.com/ - who made sure his rear-end was covered first. To just move out in the middle of the night is a very bad idea.

Yes, yes! Many good comments.

The faster more underwater debt slave "owners" walk away from their mortgage albatross, the faster we will reach real price discovery, and return the housing market to health.

Those who continue to pay because it is "ethical" will transfer their hard earned wealth to the banks.

Now, if you love your home and location, then this may be irrelevant, as the cost of happiness may be justified. Otherwise, NOW is the time to seriously assess your situation, and consider walking away before stuffing more of your hard earned quid into the Banskters bottomless pockets

@ Steve,

There is the Debt Forgiveness Act which allows the 1099 to be written off so you don't pay income taxes. There are certain rules that apply such as it must be a primary residence, loan amount limit up to $1 million, etc. Consult your CPA if this applies to you. The Debt Forgiveness Act expires soon so if there is ever a time to walk away it is now.

The only other issue is the deficiency judgment. I am sure there are some banks that are pursuing them, but the majority are not. It is a matter of luck if the bank comes after you for the deficiency in what you owed and what the bank sells the property for. If you are flat broke, then a bankruptcy would be the way to go to avoid this. Of course, consult with a BK attorney for this.

The 1099 is a certainty. However, the deficiency judgment is a possibility.

Very loose credit standards hyped up the residential real estate market for years. Many people with good credit would not have paid as much as they did were it not for the GREED of mortgage lenders. Those people who find themselves underwater because of the market conditions created by the mortgage industry should act in their own best interest. Bankers certainly have.

If you have no character and lack any sense of personal responsibility, walking away is probably an OK solution for you. No one should EVER trust you again, however.

Walk away? People forget that when the bank gives you a mortgage they the bank are taking a risk along with you the borrower. It clearly states in the mortgage note " If you can't pay, we have the right to foreclose". so what's the controversey? For years and years the banks have made tons of money on high interest rates. As a borrower, I have every right to give the keys back and not look frowned upon.