If banks can walk away from debt, can you?

Foreclosures are not the problem in the Northwest that they’ve become in areas like Southern California or Florida, but they are happening here. And lenders who’ve already taken a hit from unpaid mortgages are bracing for a shift in thinking on the part of homeowners that could magnify their problems, according to the Calculated Risk blog, that could go something like this: If I owe more on my mortgage than my home is worth, it makes more financial sense to walk away from the home and save some money.

Calculated Risk posted this quote from a conference call at Wachovia, the nation’s fourth largest bank, explaining losses in California: “People that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity, value in their properties, and so in a way, we may have -- it's hard to know right now, but we may have seen somewhat of an acceleration (in) problem loans as people have reached that conclusion and we're just going to have to see how the patterns unfold here.”

I found this on the LA Times real estate blog, which also posted a comment from a homeowner who said he bought a condo in 2006 for $520,000 that’s now worth $350,000. He’s purchased a second home and when that sale closes he plans to stop making payments on the first mortgage and take the hit to his credit while making what he feels is an otherwise smart financial move.

Here’s an excerpt of what he had to say:

"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

"I don't really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal."

This illuminates a problem far more acute in other areas, but such attitudes and loan abandonment could easily spread north and nationwide, particularly if the housing market does not go as well in 2008 as agents and brokers say it will.

Any thoughts?