STRATEGERY: So When Should You Default On Your Mortgage?

As you can see, I think that people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away–and to do so as early as possible if there is no reasonable likelihood that their circumstances will change. On the other hand, I think that if modest lifestyle changes like less steak and more hamburger, less cable and more library books, can make your mortgage payment affordable, I think you have an obligation to make those changes. And if those changes aren’t even necessary–if the default is purely and simply because you would like the bank to eat the lost equity rather than you–I don’t think that’s right.

But for all the discussion of those people, I’m not sure how many of them there are. Some, undoubtedly–in a country as big as the US, there is always some jerk doing almost anything you can imagine. But given what we know about bankruptcy, I tend to think that the overwhelming majority of people walking away from their houses are doing so because they cannot support both the home, and a basic decent life for their families. Obviously, I also tend to think that’s how it should be.

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