You cannot simply walk away from a re-fi or cash-out.
The only loan that you can “walk away” from is an original purchase loan. This is called a non-recourse loan. In this case the bank cannot come after you for other assets. The exception to this is when fraud is committed.
However, any refinance loan is no longer considered non-recourse. Same thing for Home equity products and cash-outs. All of these are subject to recourse, in which case the bank can go after other assets.
So, no you are not a chump. The person who re-fied and cashed out only to go into default will see their due, assuming they haven’t fled the country and assuming they didn’t steal someone else’s identity to get the loans.
