Sunday night's 60 Minutes news program on strategic default was an eye opener. They reported on a rapidly spreading movement by homeowners to "strategically default" on their mortgage payment. This is the decision by the homeowner to walk away from their property, even though they can afford to make the monthly payment, because it is now worth much less than they paid.
One couple interviewed had lost about 40% of the value of their $1. million home....but they felt it was their moral obligation to continue making the payment. They love their home and plan to stay there. But others interviewed had a different view point. They were walking away from the financial investment they had made because it didn't pan out the way they planned.
The 60 Minutes segment noted that 7 million home have payments that are in arrears. What would be the fiscal consequences if many of them decided to strategically default? This would have a further devestating effect on the real estate recovery.
But what if these homeowners had been in a position to create their own equity in their home....if they had known that this was an option for them? That is what the Money Merge Account (MMA) program would have allowed them to do. Recent clients were on the verge of bankruptcy until they learned how the MMA could help them pay down principle on their mortgage and consumer debt. Since starting the program, they have made a significant alteration in the financial picture.
It's difficult to emphatise with homeowners who will just walk away from a financial obligation, even though they can afford the payments. While there are those who sincerely want to find a solution.
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