Fannie Mae ignited a chorus of criticism last week when it said it would deny government-backed mortgages for seven years to borrowers who walked away from their existing mortgages, had the ability to pay, and didn t make a good faith effort to avoid foreclosure by negotiating with their lender. The government-owned mortgage-finance giant also said it will take legal action to recoup the loan balance against borrowers who strategically default.

I say it s about time. These relatively affluent borrowers should pay a price even if it s a modest one for walking away from a contract. As it is, reports have been proliferating about homeowners who simply stop paying their mortgages, stay on in their comfortable homes rent free for the 18 months to two years or more it can take for the lender to foreclose, then get another government-backed loan and buy a new house. Who s to say they won t do it all over again?

Nor will encouraging people to default do anything to stem the rising tide of foreclosures and its potentially debilitating effect on housing prices.

This is a looming crisis, given that an estimated one-quarter of all home mortgages are currently underwater, meaning that the house is worth less than the balance of the mortgage. The serious delinquency rate on mortgages backed by Fannie Mae has already soared to over 5%. Imagine if that leaped to over 20%. Since Fannie Mae and Freddie Mac became wards of the federal government, we taxpayers are footing the bill, which the Congressional Budget Office now estimates will reach an astonishing $389 billion. That s likely to be far more than the bank bailouts and dwarfs the cost of rescuing AIG.

So I was baffled by critics who equate this new policy to things like debtor s prison. Asking people to pay their mortgages when they can afford to is hardly locking people in a prison for the rest of their lives. These owners chose their homes and presumably liked them. They had no guarantee that housing prices would appreciate indefinitely and never decline. As I ve argued before, walking away from a mortgage now is like selling at the bottom of the market.

Houses that are underwater now may not be for long once housing starts to appreciate. And despite a recent slump in the number of home sales, home prices are rising in most areas and have been for the past year.

Nor does homeownership convey a right to immediate mobility. Buying a home is a relatively long-term commitment, and most people expecting to move soon opt to rent instead. Even renting typically requires a one-year lease.

Anyone forced to move may have to sell at a loss, but they can also buy another home at lower market prices unless they re moving from, say, Las Vegas to Manhattan. But that s their choice.

I asked Fannie Mae spokeswoman Janis Smith whether she was surprised by hostile reactions to the new policy, and sounding somewhat weary, she said, We ve seen it all. She stressed that the new policy doesn t apply to hardship cases and that when defaulting borrowers reapply, Fannie Mae will consider the circumstances of their earlier default and, if warranted, grant an exemption.

In my view, strategic default is too kind a phrase for breaking a promise and breaching a contract. I recognize that there are plenty of people facing genuine hardship from a housing crisis not of their making. But people who have the means to pay their mortgages but opt instead for a free ride at taxpayer expense aren t among them.