Lowenstein asks: "Why should underwater homeowners behave any differently from banks?" The answer is that homeowners of a certain age (let's call it over 35) have been taught to believe that when they assume an obligation, it's just that--an obligation. Borrowers are uncomfortable simply walking away.
Although I agree with Lowenstein's thesis, I'm not so sure that the best way to convince people to walk is by using the argument that "you too can be as gross as every bank out there." Instead, the decision to walk away must be made with care and guidance. I spoke with a bankruptcy attorney who said that she needs to demonstrate to her clients with clear numbers how walking away and/or declaring bankruptcy can repair a family's financial situation in the long run. Otherwise, the clients usually balk at the idea.
I recall a situation in my previous life as a financial planner when one of my clients' adult child had run into trouble with a mortgage. My client didn't want his son to walk away from the mortgage, but after analyzing the numbers, I looked at them both and said, "In this case, I think it's fair to say that you should run, not walk away from this loan."
Image by Flickr User Martineric, CC 2.0