LAVENDERLAWBLOG POST: HOMEOWNERS WALKING AWAY
The below New York Times article indicates that a number of people would walk away from their homes if equity was lost and the market value dropped below the mortgage that was owed. I don’t know where the referenced surveys were taken. Some areas of the country have seen larger drops in residential home values than others.
Prior to intentionally walking away from your home and “strategically defaulting” under your loan, I would first look into renegotiating your loan with the lender. It may be that the lender would not agree to renegotiate your loan unless you were in default. Before refusing to pay the loan, it would be prudent to attempt the sale of the property for the current market value as part of a short sale and start with a clean slate. A person’s credit is their life line to the world. Without credit (even if it is less than perfect) it would be difficult to operate in today’s society. If it came up that a home was sold as part of a “short sale”, it can be explained that sole reason for the short sale was that the market value was not sufficient to pay off the existing mortgage and there was no default in payment. Going into default of the loan payments (intentionally or not) and selling a home as part of a short sale will likely damage a individual’s credit for quite some time. A short sale is the sale of a house, where the current lender (called a “mortgagee”) agrees to accept less that is owed under the mortgage loan so that the home can be sold to an arm’s length purchaser for value. An application will need to be made to the existing lender and the conditions of the acceptance of the reduced loan payoff should be thoroughly reviewed. Some consenting lenders provide language in a proposed settlement agreement that permits the lender to seek payment of the unpaid amount directly from the borrower after the closing and sale of the home that was subject to the mortgage.
Homeowners Walking Away By BOB TEDESCHI Published: October 25, 2009
Many homeowners question whether they should abandon a home that’s “underwater” even if they can still afford the payments.
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