So? It's gone forever whether you default or not.
How is your situation improved by sticking around to pay $400,000 + cost of financing for a $300,000 house? That just loses you a second $100K (plus cost of financing).
How is your situation improved by sticking around to pay $400,000 + cost of financing for a $300,000 house? That just loses you a second $100K (plus cost of financing).
Your premise assumes housing values never go back up. The value is not necessarily gone forever.
The house that declined to $300k can climb back to $400k or $500k.
You can continue paying the mortgage, do absolutely nothing else, and watch as the property value climbs back to where it was due to economic factors (whether a hot economy or low interest rates fueling value recovery).
Over five years, from Jan 2010 to Jan 2015 you pay $120,000 in mortgages payments on the $400,000 mortgage. You get back to 2015 and the housing market has recovered your property back to over $400k (from the low of $300k). You continue making your mortgage payments. By Jan 2018, thanks to hot asset prices, your house is now worth $550,000. You're now solidly above water, you've paid off ~26% of your mortgage term (eight years of payments), and you're sitting on maybe $200,000 in equity value vs your original $500k purchase price. The value of the property recovered, and you didn't lose your $100k down payment from walking away.
Depending on the circumstances, you may very well have been better off holding on to a property in 2009-2010, rather than selling at a loss. The housing value recovery has been extraordinary over the last six or seven years. Certainly some property scenarios were extreme, where owners were perma-buried. The worst hit states, such as Arizona, Nevada, Florida, etc. saw rapid value recoveries.