This was left today on the previous thread started last week:

watuppp (Unregistered) commented on Data on Subprime and Alt-A:

I feel compelled to this string. I bought my home in 2005. My FICO score was over 750. I could document my income. I purchased my home financing 100% with 80% mtg. in the amount of 440,000 and a HELOC of 110,000. My household income is $175,000. My loan resets in 2010. As I sit here today I'm contemplating walking away from the home. I have no car payments. I have no credit card dept. 

I can afford the payments at the ceiling of the mtg. amount. When I took out the loan I looked at historical data for the vehicles my mtg. and HELOC's were tied to. My Mtg. has a max. ceiling. Using a worse case scenario I determined I could afford the payment. I would be living really tight, but could make the payments. The one thing I didn't take into consideration is the insane devaluation of the home. Given the current circumstances I believe when things level out in 3 to 5 years my home will be worth in the neighborhood of 200,000 less than the purchase price. Once things level out, appreciation will be about 1 to 3% a year. I simply can't afford to take that kind of hit. It could conceivably take 10 to 15 years to break even.

I'm not the only one looking at these numbers. I pay my bills. I always have. I consider myself responsible in that regard and my credit score reflects this. Regardless I have to protect myself and my family from financial ruin. I will be deciding this weekend if I'm going to walk away from my home. I'm meeting with a real estate lawyer and a tax accountant to make sure I have all the correct info. My research, which I will confirm, indicates that the bank cannot and will not come after me if the home goes into foreclosure. I'm pretty sure I will be taxed on the difference between the amount owned less the amount the home is appraised at when the bank takes possession. In other words the longer I wait the larger the tax burden will be if prices continue to decline. Does anyone here believe prices won't substantially decrease over the next 3 to 5 years?

Things are going to get much worse. People basically have to walk away. The government will set up programs to bail out the banks and they know that. I contacted my bank hoping to work something out but they aren't receptive. I have money in the bank I would be willing to put towards the principle if they were willing to refinance at a fixed rate for a lower principle amount. I wouldn't expect them to reduce the principle to the market price. I would be willing to take a hit in that regard, but I would expect them to take a hit also. They won't budge. What possible reason would I have to stay in the home.  I understood the terms of my loan. I understood the ramifications of the reset.I even was aware the value of my home may decrease. What I didn't understand and anticipate was the amount of the decrease in the value. It was my first home and admittedly made a mistake. Evidently it was the same mistake made by banks and Wall street who were much more educated and experienced than myself.

At the end of the day a home purchase and mortgage agreement is a business transaction. The bank who loaned me the money did so in a non recourse state.  They understood the terms of the contract and believed the risk of no down payment interest only was a good business decision. At this point it looks like I'll have to give the home back to them. I also have a credit line that is still available to me. I'm considering using it to compensate for the amount I'll lose when the government knocks on my door for what they consider "phantom" income for the difference between the amount owed on my loan the the value of he home. I consider the equity line phantom cash at my deposal.

I believe my real life example illustrates the individual vs corporations and government. I'm simply applying the same standards they apply when making a "business" decision. I guarantee I'm not the only one looking at this situation the same way.

Things are going to get much worse. Home prices will fall to 2000/2001 amounts.  Anyone who bought a home from 2004/2007 should get out now or risk losing their ass.