Define 'Moral Hazard'

Who ever thought that having your house foreclosed on would be good personal economic policy?

This is anecdotal, but, I believe the source...

In Ladera Ranch, CA, a large number of homeowners, who have Option ARM's, are currently "stacking cash" to prepare for the date that their ARM adjusts upwards on a home which is 25-30% UNDERWATER...
at that time, these folks plan to stop making payments and wait for the bank to foreclose (6-10 months after they stop making payments)

at that point, these folks will have cash available to pay for a mover, pay 6 months rent in advance on a leased home and wait a year or two for the home prices to fall further, at which point, these folks plan to buy a house at a much lower price...