Banks do not do favors

The financial calculus is pretty clear. But from a moral standpoint, the rationale should be just as obvious. The bank was not doing you a favor when it extended you a loan. It was trying to make money off of you. If that effort doesn’t work out for the bank, it’s not your fault. The contract is very clear about what happens if you can’t pay the loan — the bank gets the house. If the bank can’t takeover your house quickly because their business is clunky and cumbersome, that is also not your fault. Banks themselves walk away from real estate deals when they do not appear profitable. There is no shame you making the same choice.

From Why Banks Try to Make Borrowers Feel Like Sinners When They Can’t Pay off Their Mortgages by Zach Carter on Alternet.org.

There is no shame, but there is a risk in most states that you will be sued for the difference between what the bank sells your house for after a foreclosure and what you still owe. It is relatively rare, however, if you only have one mortgage, and few assets, but it is still possible. Your best bet is to consult an attorney and review your mortgage contract.

You also take a pretty severe credit hit in the first few years. But if you’re looking at 7 years of janky credit versus 10 or more years before you will be able to sell your house for what you owe — or short selling and having damaged credit for 7 years from the sale date — it could be worth the hit.