An article in today’s Wall Street Journal poses just that question and suggests that for many people the risks and consequences of walking away from their mortgage outweigh the benefits of staying in their home and continuing to make payments, especially when the house is underwater. The full text of the article can be found here.
There are very real and potential negative consequences for homeowners but given the fact that according to First American CoreLogic, a real-estate information company, 5.3 million U.S. households have mortgage balances at least 20% higher than their homes’ value, and 2.2 million of those households are at least 50% under water, the continued liability of the home is greater than the liability associated with just walking away. The problem of underwater mortgages is concentrated in Arizona, California, Florida, Michigan and Nevada.
The problem is only going to continue to get worse as lenders are increasingly difficult to work with and the number of modifications that lenders enter into with homeowners remains extremely low. While the number of modifications is extremely low, I am not aware of any program or circumstance where lenders are reducing the principal of the loans an action that would be necessary to convince homeowners to continue making payments on an underwater home.
Banks should be actively working with homeowners to pursue deed in lieu and short sale alternatives, but the reactions from virtually all lenders I am familiar with is just painfully slow or totally non-existent.
If you are considering walking away, contact Matt Weidner at www.matweidnerlaw.com
