Yep, it will take a hit.
And if you’re in a situation where you default on your credit cards or student loans, you suffer a worse hit to your credit than handing in the keys on a house while you’re current on payments, ie, ‘ruthless default’ on a house.
The banks *asked* for this outcome when they elevated other forms of debt to be more punitive in default (or impossible to default on) in 2005. They must have thought this was the preferable outcome, because they practically wrote the “bankruptcy reform” bill.
What our economy needs more than anything else is for housing and housing backed assets to be deleveraged back to their pricing fundamentals.
We needed this in 2006, we needed it in 2008, and we need it today, despite the frantic efforts of both Democrats and Republicans to pump more helium into the shrinking bubble.
I frankly think walkaways are good for this process. Better that a bank get the house back and sell it at $200,000 to a willing buyer with a down payment, than keep a $400,000 Monopoly money mortgage on its books. The latter does nothing to help re-establish property values on a free market basis.