Someone takes on a debt using property as security, if they forfeit the security why should they be excused from the difference between the value of the security and the value of the debt?
The aren't excused from the value of the debt. They are returning the collateral, which closes out the debt.
The whole price of the loan (interest rate, points, etc...) was based upon the home being the only recoverable asset in the case of default.
This is why most loans with less than 20% equity have to pay primary mortgage insurance. If your house declines in value, you probably have an agreement that PMI kicks it. The lender being the beneficiary if the PMI has to pay off.
Theoretically this both protects the borrower from predatory practices and encourages the lender to make quality loans.
A counter argument is that someone agrees to loan you some money in exchange for some collateral. If the value of the collateral isn't enough to cover the value of the loan in case of forfeit then surely that is the lenders problem since he was the one who set the level of collateral too low.
Because you are penalized for not being a fortune teller. They are archaic because it doesn't work well in a modern market. Oh, it worked, alright. Right up until the housing market stopped going up. Then when it went down all that capital was tied up in personal debt. The bank got the house and their pound of flesh, for perpetuity. And I mean that in some people will never be able to pay off that loan and see suicide as a viable option.
Someone takes on a debt using property as security, if they forfeit the security why should they be excused from the difference between the value of the security and the value of the debt?