They're not alone -- Morgan Stanley recently dumped five San Francisco office buildings, stiffing their creditors when the buildings went underwater.
As a business-strategy it makes sense: why repay loans secured by assets that are worth less than the loans? Just turn the assets over and cut your losses.
But individuals are shamed, bullied, and counselled not to do this when it's their private homes that fall underwater. Everyone from former US Treasury Secretary Hank Paulson to credit counsellors to the Mortgage Bankers Association tell you that defaulting on underwater property is low and dishonest (unless you're a Wall Street player -- then it's just "protecting shareholder value").
Former Treasury Secretary Hank Paulson once said: "And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator - and one who is not honoring his obligations."Don't Look Back: Major Players Continue To 'Walk Away' From Poor Mortgages (Thanks, Fipi Lele!)
The head of the Mortgage Bankers Association, John Courson, played up the moral argument against walking away, telling the Wall Street Journal last month: "What about the message they will send to their family and their kids and their friends?
But corporations and businesses don't play by those rules. Like CalPERS's McKinley said, "You come to a point where you write it off or stay in the game. If you want to stay in you got to put in more capital. We reached our limit on that. It was not a prudent thing to put more money into it.
"You get to a point where you can't keep throwing good money after bad," he said. "These are illiquid investments. You gotta fish or cut bait."
As for homeowners walking away en masse -- perhaps lenders' biggest housing-related fear -- McKinley added: "We're hopeful that won't happen."
(Image: Friendly's Underwater Restaurant, a Creative Commons Attribution ShareAlike image from nlnnet's photostream)
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I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.