If the debt is non-recourse, and as long as the buyer is not committing fraud in his new loan application, and since the tax consequences have been negated by the passage of HR 3648, it seems what he is doing is completely legal, logical, moral, and to do anything else would be irrational. He’s not breaking any agreement he made with anyone.

IMHO, the consequences will be allocated appropriately: his credit will be wrecked, and the lender (or CDO buyer) will get what they deserve, which is a huge loss due to their non-existent lending standards (or a huge loss on an investment they didn’t understand). The professionals in charge of managing the risk and who blew it will, appropriately, take almost all of the hit.

Anyone who has been sitting on the sidelines throughout this madness should get a premium rate as a reward for their prudence. So what’s with all the crying and hand-wringing?