"My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.As they say in Australia, "Good on ya, mate!" He's exactly right. There's nothing immoral about walking away. It's the smart thing to do. When the bank makes the loan, the law and the contract make clear that the bank is your partner in taking on real estate risk. If you put little or no money down, the bank is taking on more risk and is compensated for that risk in the form of a higher interest rate. If it so happens that bank took on stupid risks and lost the gamble, there is no obligation for a borrower to shield the bank from the consequences of its actions.
"Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I'm not a 'hardship' case they'd apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won't even talk to me until I miss a couple of payments.
"I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.
"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.
"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."
HT: Calculated Risk.
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