What’s so shocking with walking away? We should emphasize that walking is an option provided by the loan agreement. In essence a mortgage is simply an option to stay and make the payments or walking and turning your house over to the lender.
You stay if you’re in the money, else walk away.
Cramer is right about the 2/28. Imagine 1%-3% teaser rate mortgages recasting at 8%-12%; combine that with 20% drop in real estate values. Of course, the owners will default at near 100% rate.
