Professor: Underwater homeowners acting irrationally

I bet this professor didn't get a government grant for this study (emphasis mine):

Millions of American homeowners are "underwater" on their mortgages – owing more than the value of their homes – and would be better off walking away.
...
"These emotional constraints are deliberately cultivated by the government and lenders who self-servingly tell borrowers that they have a moral and social obligation to pay their underwater mortgages," said White of the UA's James E. Rogers College of Law.

"Meanwhile, lenders ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility," he added.
...
He argues that while irresponsible lenders have received government bailouts, responsible homeowners "who just happened to buy at the wrong time continue to bear a disproportionate burden of the housing collapse."
...
"The government, lenders, and credit-counseling agencies bombard homeowners with moral and fear-laden messages that overstate the consequences of foreclosure," said White.

"Moreover, as a way of enforcing the double moral standard, lenders hold borrowers' credit scores as collateral and will trash it in retaliation for the borrower's exercise of their contractual option to default."

"Lenders don't want these houses and, with the government's help, do what they can to scare and shame borrowers into making what is in many cases a bad financial decision to stay in their home."
...
"To the contrary, walking away may be the most financially responsible choice if it allows one to meet one's unsecured credit obligations or provide for the future economic stability of one's family," he said.
...
"The current housing bust should be viewed for what it is: a failure to regulate – not a moral failure on the part of American homeowners," White said.

I haven't read the paper yet but I will put it on the reading list for tomorrow night. I don't think one professor will get much airplay but most of the stuff I have heard him say so far I have agreed with. Though I disagree that the credit score hit is asymmetrically unfair as the borrower is causing a loss to the lender in that situation when taking the aforementioned option to walk away. The smartest financial decision for many is to walk away and hit the reset button. But emotion and logic don't mix. People don't want to admit failure and will go to great lengths not to do so. Many people will continue to throw good money after bad and the banks are counting on that.