Walking away is the answer for those that are underwater. Is it honorable, ethical, etc.? That's all out the window in this economy. People have to consider their future and if they are able to take care of themselves in their retirement. Will they become a burden to their families financially if they stay in a house that is underwater, they just might. That drags down another generation or two. If someone is only a few thousand underwater then don't walk away but, if someone is a hundred thousand plus underwater it is financially smart for that person to walk away. Why pay a mortgage on a house purchased for $500,000 when the current value is $200,000, that's not smart if the mortgage is $300,000 or more. That person has 2 years after a foreclosure to save money and buy another property at current market value. The home they walked away from will be sold way under what their mortgage was, a deal for someone else. It's all an adjustment in the economy. Anyone holding onto a house with a mortgage way higher than the current market value of the home has no hope of selling and breaking even or making a profit for many years to come. They cannot do a refi and chances are they have a very high interest rate. It makes no sense to hold onto a house in that situation. Many people are swallowing their pride and facing reality and doing what is sensible.

IF the collective population were ALL jumping over a cliff, THAT does NOT make it RIGHT. There is NO justification for SCREWING a lender simply BECAUSE your RESEARCH concludes it IS financially BENEFICIAL for you TO do so.

I don't RECALL ever seeing an, "...only if my property value stays high" clause IN any LOAN document.

WE ALL PAY THE PRICE FOR OTHERS WALKING AWAY FROM THEIR FINANCIAL OBLIGATIONS.

That is an incredibly short-sighted, selfish way of thinking. Thank GOD not everyone thinks the way you do.

I haven't seen any honorable lenders lately. Mine was nothing short of arrogant and arbitrary with their fuzzy math, using my escrow to manipulate and raise my monthly payment every single year for several years until I was unable to pay on my underwater mortgage.

I haven't screwed my lender. It takes two to tango. They went into the deal with eyes wide open too.

In the last depression, people made runs on the banks. In this one, people were prevented from doing that by a government bailout that many taxpayers disagreed with. This is what I see as a run on the banks, repackaged.

What a load of crap. the lender loanded you the money to buy the house. You signed the documents. They fulfilled their obligation now you should fullfill yours.

Low lifes! Just pay the mortgage.

On average, in Colorado, I don't think people are more than 10% underwater on their mortgage. Which is not enough of a drop to justify walking away, which is why we haven't seen much of that.

I only know of one of my friends who did short-sale, and it was done for more reasons than being upside down on the loan..

Let's not forget that Colorado is still a place people want to come to live in and that is helping our property values..

kevdog is right, but with a little twist (just from my perspective).

Colorado is a worthy place to live, my birthplace and lifelong home, BUT (as HA would say) it stands to be diminished by poor development and clumsy politics, which I suppose may be the same thing in the end.
The preservation of values in this state will be directly related to land and resource preservation. Development should be strictly curtailed except in limited designated areas, and political "leaders" should focus on what makes the place precious instead of what exploits it most quickly.

Again, just mho.

I think this is AWFUL advice which just steals from the taxpayer. First thing, this is an exaggerated case. No one has $500,000 loan on a $200,000 house. Next, when you signed up for that $500K loan, you must have thought it was a good deal at the time and that you could pay it back. Just keep living there and enjoy the house with the new lower property taxes. If instead you were an idiot who bought the house just because you thought you could sell it for $800K next year then TOUGH LUCK - you gambled and lost. Should I be able to undo a bad stock trade? Sell back a car that lost value?
Whatever happened to morality? At a minimum, anyone allowed to "walkaway" from bad investments needs to have severe repercussions. For example, anyone who gets Obama mortgage rescue funds or foreclosure breaks should at least have to pay that back on any FUTURE profits they make on any other house they sell. In other words, the govt. would own say 30% of the house and thus would get 30% value of any future sale.

Aren't most people these days voting for politicians who promise to alleviate everyone of any responsibilities whatsoever (except to serve "others")? I think blaming anyone/everyone else for one's own circumstances is just part of the "entitlement" trend. It will end this country and its unprecedented freedoms. Please speak out against it when appropriate.

If your lender is one of the large banks you may not have a chance of doing this, but if your loan is with a small lender you have a good chance of going to your lender and having a modification done so that it is easier to handle your payments. Lenders really don't want to take back any more property - they have too much already - so many are working with borrowers.

Also, before you "walk away", consider the fact that the difference between the value of your property and the amount you owe may trigger "forgiveness of debt" tax issues. That amount could be taxable to you as ordinary income, depending on other considerations (net worth/liquidity, etc). Be sure to consult with your accountant first.

All in all, in our part of the country we have been seeing less foreclosures, a loosening of lending, and particularly in the Denver/Front Range a slight up-tick in home values (as compared to the Western Slope where values continue to decline on the whole).

In my opinion, this is totally off topic and belongs in The Study. I'll be happy to debate you there, if you are serious and not just trolling.