Until the banks get their act together, this will happen. Is this morally any wronger than declaring a bankruptcy when a risky (but not fraudulent) venture fails?
“Is this morally any wronger than declaring a bankruptcy when a risky (but not fraudulent) venture fails?”
Yes. It is.
A bankruptcy court process of a business does not allow the owners or the business to simply walk away from all their creditors. In fact, certain creditors can be required to be paid by the sale or confiscation of the owners/businesses assets, and certain creditors have top pick at converting debt to an equity stake, and certain creditors may be awarded payment from future revenue of the business after it is re-organized - and many other possibilities as well.
But, in almost every state in the U.S., a homeowner can just walk away and the mortgage-holder has “no recourse” because in almost every state all mortgages are by law “no recourse” mortgages. That is not the case in most other countries.
In most other countries if a mortgage holder forecloses on a mortgagee who is in default, the mortgagee will still owe whatever principal remains on the mortgage after the property is auctioned. Why? Because that is the amount of money the mortgage holder gave to the mortgagee.
In the U.S., they can never come after you for that loss. They can give you a million dollars and you can give them a few years of payments that (in the early years) just pay interest and no principal; and then you can walk away, “Scott free”, no matter how much of that million ever gets repaid to the people that gave it to you. Sorry; that’s immoral.