Should you default on your mortgage?

Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She is a sensible person. She poses some questions for people considering defaulting on their mortgages -- if you're in that situation, read them -- and comes to this conclusion.

I think that people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away--and to do so as early as possible if there is no reasonable likelihood that their circumstances will change. On the other hand, I think that if modest lifestyle changes like less steak and more hamburger, less cable and more library books, can make your mortgage payment affordable, I think you have an obligation to make those changes. And if those changes aren't even necessary--if the default is purely and simply because you would like the bank to eat the lost equity rather than you--I don't think that's right. 

But for all the discussion of those people, I'm not sure how many of them there are. Some, undoubtedly--in a country as big as the US, there is always some jerk doing almost anything you can imagine. But given what we know about bankruptcy, I tend to think that the overwhelming majority of people walking away from their houses are doing so because they cannot support both the home, and a basic decent life for their families. Obviously, I also tend to think that's how it should be. 

Obviously, I'm much more sympathetic with low-income defaulters, who have little room to cut, than with a family that makes $250,000 a year. There's a lot that can be cut out of a high-earner's budgets; almost nothing that can be cut if a family is living on $35,000 a year. Find your way to Goodwill a few times before you come to me and tell me that you can't possibly cut the clothing and furniture budget another inch. 

It's quite possible that more people should be defaulting on their mortgages. But I don't think that we should encourage them to on the grounds that "Hey, corporations do it!" Rather, I think that the proper way to look at it is that while your promises to the bank are very important, your promises to your family that you will keep them decently clothed, sheltered, fed, educated, and prepared for a time when they cannot work . . . those promises are even more important, and you have an obligation to honor them before your promise to the bank.