There was a nice expose on CBS 60 Minutes this weekend called House Of Cards. I seldom watch TV but happened to catch it.

Steve Kroft reports on how the U.S. sub-prime mortgage meltdown, in which risky loans drove a housing boom that went bust, is now roiling capital markets worldwide.
"Matt and Stephanie Valdez say they knew exactly what they were doing when they bought this small two bedroom house for $355,000."

http://bp3.blogger.com/_nSTO-vZpSgc/R51l9uUG2-I/AAAAAAAAB_E/DEhDqMDZy-c/s400/valdez.png (http://bp3.blogger.com/_nSTO-vZpSgc/R51l9uUG2-I/AAAAAAAAB_E/DEhDqMDZy-c/s1600-h/valdez.png)

....They cannot refinance because the value of the house fell below the existing mortgage. They say they can afford the higher payments but see no point in making them.

Matt: The value of the house keeps going down and the payments keep going up. Where's the logic in that?

Stephanie: Why make a $3200 a month payment on a 1200 square foot home? It makes no sense.

Steve Kroft: But that's what you agreed to do when you bought the house.

Stephanie: Fine if the value was going up. The value is going down.

Steve Kroft: You are saying essentially you are going to stop making payments.

Stephanie: The only advice we've gotten so far is to walk away.

http://globaleconomicanalysis.blogspot.com/2008/01/60-minutes-legitimizes-walking-away.html

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Using the same logic, perhaps I should buy a new Benz, drive it for two years, then just walk away from it after I'm tired of it and it has lost significant value.

Apparently the penalties for 'walking away' are not severe enough. Understandably, a standard mortgage is a "no recourse" loan and those who took out a HELOC cannot walk away, however perhaps a lender should be able to file criminal charges (fraud) against those who just don't want to accept the hand they dealt themselves.

but watch when those people try to buy their next house...credit history is a bitch :)

Not really.

More from the article:

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This is how it works. Bob paid $420,000 for his home. Then he notices the house across the street, with more upgrades, and is selling for $315,000.

So Bob, who has pretty good credit, decides to buy the cheaper house. He can't afford both, so then he walks away from his original home, letting it fall into foreclosure. That will hurt his credit, but he's willing to take the hit for a more affordable home.

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So, he walks from house #1 after he's moved into house #2. Sure, having the mark on your credit for 7 years isn't good, but what does he give up? A new car? A credit card? Doubtful.

Look at the big brain on Doug!!

the guy will pay higher interest rates on everything. a foreclosure is supposedly a pretty big hit on your credit rating, so yes he will pay more for every cent he borrows.

This is not new. A lot of people are being told by their loan agents to get a 3rd or 4th house right now , and lock in a great price/ fixed rate. Once they get it, they dump the 2-3 other homes they have with adjustables and Neg Am loans. This is the new trend, that will sink lenders into an even deeper funk.

the guy will pay higher interest rates on everything. a foreclosure is supposedly a pretty big hit on your credit rating, so yes he will pay more for every cent he borrows.

If he needs it. I really don't need credit anymore. I have nearly $100,000 available on unsecured credit cards, don't need car loans, and have a mortgage. I seriously won't need to apply for new credit for a long time. If I bought a 2nd house and foreclosed my current, a low credit score for the next 7 years would mean nothing to me since I don't need any credit.

If he needs it. I really don't need credit anymore. I have nearly $100,000 available on unsecured credit cards, don't need car loans, and have a mortgage. I seriously won't need to apply for new credit for a long time. If I bought a 2nd house and foreclosed my current, a low credit score for the next 7 years would mean nothing to me since I don't need any credit.

i would submit that your situation is not normal at all, given the amount of consumer debt in this country...

however perhaps a lender should be able to file criminal charges (fraud) against those who just don't want to accept the hand they dealt themselves.

I think that is perfect. Man up and take responsibility for what you signed as a valid, legal contract.

Or go to jail for fraud. I like that idea.

Itz all boolsheeit!!

I've suffered from serious credit problems since my divorce in 2003. It makes you make adjustments in your life, and is by no means the end of the world. It does take a long time to rebuild it. I'm in the mid to high 500's right now, after doing everything I can to boost it up. I sense there will be a lot more people with fucked up credit after this housing disaster.

I sense there will be a lot more people with fucked up credit after this housing disaster.

I agree, and unfortunately, since it will be such a huge number, it'll be considered 'ok'.

just like foreclosure is now socially ok.