There is a big difference between regular debt and collateral-backed debt. The whole point of a loan backed by a collateral (in this case, the house) is that th

There is a big difference between regular debt and collateral-backed debt. The whole point of a loan backed by a collateral (in this case, the house) is that the lender gets said collateral upon default. Mortgage lenders are not "screwed" by foreclosures - they would love a foreclosure on a house whose value is up. Banks do not count on your paying off the house - if they did, they would not explicitly demand your house as a collateral upfront. They are exactly like the pawn shop owner who takes your wedding ring in exchange for some cash. It's not a moral obligation on the part of the owner to buy the ring back if the price of gold goes down to the point where it's cheaper to buy a new ring - so why is it a moral obligation on the part of the home owner to buy the house back from the bank? Perhaps those rich people are not "ruthless" - perhaps they are rich because they understand things like that.