In some cases, it may be a sound economic decision for regular homeowners, not the subprimes or ARMs, but just regular homeowners, to mail in their keys and walk away from their house.
If you have a $500,000 mortgage, and your house is now worth $300,000.. The fiscally responsible move on the part of the homeowner should be to walk away. Mail the keys to the mortgage company, and immediately stop paying the mortgage. Let the bank foreclose on it.
Businesses do it all the time, go, "well, that didn't work out, let's close the plant and fire all the workers and try something else." and end up just walking away from their mistakes. There's a short-term cost to be paid, sure.. Businesses pay for worker retraining and severance pay, homeowners get 7 years of bad credit.
BUT... You're no longer pointlessly hemorrhaging money.
Which leads us to the danger:
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