Bailing Out When Your Property Is Underwater

A good article on Boing Boing...

Tishman Speyer Properties and its co-investors just walked away from the largest real-estate deal in US history, simply defaulting on the properties and the loans that bought them and leaving their creditors in the lurch. The properties, Manhattan's 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town, were "under water" (worth less than the debt hanging over them), so the corporate developers elected to simply jettison them.

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").