A recent article in the Arizona Republic about “jingle mail” – when homeowners simply mail the lender back the keys to the home and walk away rather than struggle to pay the mortgage – got me thinking: are there any situations in which walking away is really a better choice in the long run?

Are there really any cases in which people – even those in bad situations now – won’t recoup their losses and do well in the long term? 

One problem is that many people got into the recent housing bubble without putting any money down – so there was no real initial investment on their part.  So in walking away they only lose their good credit rating (as most initial mortgage payments just go to interest anyway, even on a conventional loan).

Even people who bought at the peak of the bubble and saw the value of their homes drop 20% will recoup that loss over time – in a normal market the average annual rate of appreciation is about 6-8%.  But maybe, in their minds, it’s less costly to simply walk away from the house that has taken such a hit (their mortgage is for the full value of the house at the peak, after all).

Call me old fashioned, but there’s just something good and solid and, well, American about fulfilling our obligations.  I think that it’s about more than just a financial which-costs-me-less decision.  I think there’s a lot of value in honoring our obligations, even if that means being upside down on a mortgage until the market rebounds (which it will, no doubt).

Of course, I’m not talking to people who really can’t afford their mortgages.  If the decision is between putting food on the table and shoes on your children’s feet or paying the mortgage, by all means, the mortgage is less important.  But the borrower profiled in the Arizona Republic article who was walking away from her Tatum Ranch home seemed well able to pay the mortgage.

That’s my 2 cents, anyway.  What do you think?