What’s the issue? The $800K loan and house is toast. The option ARM will expire and the borrower will need a new place to live.
Should he:
A) arrange for a place now while he still has options?
B) wait until he has no options, has exhausted his credit and the Sheriff shows up to force his butt out to the curb?
A, like it or not, is the right choice. If the mortgage allows the borrower to walk away, then they can walk away. Finding a new place whether a cheaper home they can afford or merely a more affordable rental is immaterial to the discussion about whether or not someone that is upside down $300,000 on an $800,000 loan should walk away.
