I cannot believe so many people on this thread do not believe in personal responsibility. I have always thought personal responsibility is the cornerstone of conservatism. My husband and I could be in the same boat but since we keep our agreements we make sure we know the risks involved before we make the most important purchase of our lives. We made a foolish deal in 1982 when we bought our first home and we learned our lesson by paying on a high interest loan for several years before we could refi at a better rate.
A mortgage is a business deal. There is nothing sacrosanct about it. If the equity was rising and the homeowner lost the ability to pay and the bank took the property back, reaping all the benefit, would anyone say that wasn’t fair? Of course not. They would simply say that was the risk inherent in the deal and buyer should have known and accepted it. It is the same thing in reverse. It is not good or bad it is just business.
Furthermore, businesses/companies default all the time on deals which become unprofitable. As shareholders we demand they do so to protect the company and the stock price. People need to lighten up on strategic defaulters. By giving up the property that was the subject of the mortgage they have fully performed the contract. The banks made poor judgment in making the deal and should not be protected or bailed out for doing so.
The bankruptcy laws exist for a reason. One purpose of these laws is to shift some of the responsibility for non-payment to lenders who make unnecessarily risky loans.
The interest paid on loans needs to include a portion to cover the possibility that some loans will not be repaid.
Lenders who receive government money to make loans and who face no risk themselves are a serious problem for our economy. If it was the lenders facing the losses now they would be bending over backward to help their borrowers stay in their homes and make the payments.
I don't deny that there are plenty of people who are irresponsible. Government policies have encouraged and rewarded such irresponsibility for some time.