Ericonline

THE AUTHOR OF THIS ARTICLE IS BIASED AND PUSHING AN AGENDA...AND LOOKING FOR ATTENTION! IF YOU DON'T BELEIVE ME THEN CHECK OUT HIS WEBSITE.

On the part of the homeowner, the question Roger Lowenstein asks is more a question of financial ignorance than it is of morals. Don't forget that if you walk away from a mortgage you lose everything you had invested up to that point - real estate costs, down payments, closing costs, loan payments...everything. AND you have to start all over with ANOTHER mortgage. Sure, you can walk away from a losing investment but if you stuck with it, it is very likely that the investment will reach and surpass it's former value. You need to calculate what you've already invested and what it would cost to start over.

I think it comes down to greed and ignorance - on BOTH sides of the mortgage:

1) The bankers are more greedy than ignorant and lend far more than they should. They do this because they have little or nothing to lose. They are able to reduce or eliminate their risk through different schemes - some mentioned in posts below.

2) The homeowners are more ignorant than greedy and accept loans that put them on the edge of a financial precipice. If circumstances remain the same or improve, they will do ok. If circumstances worsen (house values drop, lose their job, etc) they are pushed over the edge of the precipice and are faced with either defaulting on the mortgage or continuing to pay (if they can) on a money-losing investment.

The numbers below make it easy to see who's ignorant and who's greedy:
1) Est. Foreclosures 2009 - 2011 = 9,000,000 homes
2) Est. Bank failures 2009 - 2011 = 1,100 banks