Social contract? What social contract?
[Bank of America CEO Kenneth Lewis "[T]here is a new class of homeowners in name only. Because these people never put up much of their own money, they don't act like owners, committed to their property for the long haul."
If every upside down homeowner resorted to "jingle mail" (mailing the keys to the lender), the losses for the lenders could be staggering. Assuming a 15% total price decline, and a 50% average loss per mortgage, the losses for lenders and investors would be about $1 trillion. Assuming a 30% price decline, the losses would be over $2 trillion.
Not every upside down homeowner will use jingle mail, but if prices drop 30%, the losses for the lenders and investors might well be over $1 trillion (far in excess of the $70 to $80 billion in losses reported so far).
Wouldn't it be great if all the hedge funds and lenders and investors and CEOs and brokers and commissioned sales representatives and fraudulent bankers and Rich Fucks were held accountable for the bubble they inflated--and lost everything?
A man can dream. Because "moral hazard" is for, you know, little people who need medical care.
NOTE Via the master of the Big Shitpile, Lord Eschaton.