If you have an underwater mortgage, say $120,000 mortgage on a house that is assessed at $80,000, and you are making the mortgage payments on schedule, and you ask the bank to refinance to a lower rate and the bank can’t do that because you are asking to finance a loan that is greater than the collateral, does this make sense? You’re still willing to make the payments on the $120,000 amount but you would like to pay at today’s interest rates.

Why can’t the bank work with you on this? The fiscally responsible action is for you to walk away from the loan, leaving the house and the debt in the bank’s hands. This is what all those Wall Street entrepreneurs would do. Of course it isn’t the ethical thing to do, but what do ethics have to do with fiscal responsibility?