On the moral decision I thought this post framed it best as to why just because you bought a home doesn't mean you are obligated to destroy yourself financially:
The loss was something that lenders could have anticipated at least as easily as borrowers. The reality is that ordinary people are lousy at figuring out the ins and outs of real estate transactions. Relying on the one act rule to get out of a mortgage is not to abuse the system--it is to use the system in precisely the way it was intended to be used. The reason that the one act rule exists is that lenders and developers have through the years shown a great deal of ability to maneuver unsophisticated buyers into crummy real estate deals. The reason that the one act rule exists is to put the risk of these deals on the lender, not the buyer. The purpose is to discourage bad underwriting, dishonest marketing, and unjustified price inflation by making it very, very hard for a lender to get back the money if they lent more on a mortgage than a house was worth. The system is designed to let people walk away. California has a system that puts a higher premium on keeping people out of debt slavery than avoiding bank losses.There are many variables to the issue and the layers involved are enormous and extremely individual to each borrower. Some people have reputational risk. Others need access to credit so their credit scores are very important. Some have recourse mortgages. Some can ride out the loss. Some are completely emotionally tied to the home for one reason or another. Others would never be able to recover financially from the one bad decision of buying a home during a bubble.
I don't think walking away has become mainstream yet. I think most of the borrowers are sticking it out and trying to make ends meet and don't even know how to rationally weigh all the issues at hand. I think if many did the math would dictate they walk. Instead I think many will just keep paying until the money runs out or they need to move due to normal life events.
