Many of the responses have focused on the how wrong the banks have been in all this, and that underwater homeowners are just making ‘business decisions’. I don’t have a problem with the line of thought, but it is misleading. The comparable ‘business decision’ everyone refers to would be bankruptcy not foreclosure.
Holding underwater homeowners responsible for debt is terrible policy if that is the only asset in question because it does amount to a servitude scenario and have little long-term positive results. I’d rather get them out of the situation, the home back on the market, and have a reformed debtor participating in our economy going forward. That’s what foreclosure is.
However, it is good policy to have recourse if there are other assets available. Bankruptcy should be the forced option here, including foreclosing on the home in question and taking an overall look at assets and liabilities to make a sound ‘business decision’ on the best plan.
Under our current laws, forced bankruptcy is not possible. That is, unless you are GM and Chrysler.
