Who Pays When Homeowners Walk?
Feb 14th, 2008 @ 4:03 PM by MortgageMentor
Lots of advice is floating around for homeowners who are facing foreclosure. There are many: 2.2 million in 2007, according to RealtyTrac, a research company based in California.
Most civic leaders and lawmakers are trying to educate consumers with steps that a homeowner can do to retain their home, such as: Make their mortgage payments a first priority, budget in order to avoid overspending, save money for an “emergency fund,” and let the lender know as soon as possible if the mortgage payment can’t be made. This is all normal financial advice.
Other “experts” suggest that people simply walk away from their mortgage obligation, and indeed many have chosen to do just that. There is even a website that shows homeowners how to decide whether to ditch the mortgage (uwalkaway.com).
But this leaves the mortgage investors holding the bag, even if the homeowners actually have the money to pay the mortgage–plenty of it– in the bank. People are deciding to walk away simply because the home doesn’t have much equity. One bank’s CEO pointed out that people are now walking away from homes and mortgages, yet their credit card payments are current. Just as bankruptcy has lost its stigma, so now will mortgage “walking” – and those who walk will be able to buy a home again in just a few years, while the lenders are stuck with thousands of properties.