With foreclosures steadily on the rise, one of the questions that has been surfacing is the possibility of homeowners simply walking away from their mortgage because they owe so much more than someone who just bought a foreclosure on the same block.

I've heard the term "buy & burn" used lately to describe someone who goes and purchases a new home that could even be in the same neighborhood at a cheaper price and then turn around and walk away from their current home and loan. The resulting default or foreclosure wont matter to them at this point because they've already closed escrow on a new less expensive home. I guess they just have to make sure they are set for a few years while their credit takes a huge hit.

Yes this is fraud and it is definitely NOT the right thing to do but people are doing it. I'm not sure if it is desperation or simply they don't feel obligated to stick to what they originally agreed on. Either way, I think people that are doing this will definitely get what's coming to them down the road and I don't know how they could sleep at night.

What happened to personal responsibility? I guess if these people were lending out their money, they'd be ok with someone sticking it to them as well?!! ha ha. It's just sad that so many people made really bad choices and now they are just dumping their problems onto everyone else across the board! Okay, Ok enough with my personal tirade....back to the point.

This morning I received an email questioning someone simply walking away from their home from a past referral. I'm going to paraphrase his email.

"The past 2 years has flown by and along my travels I was activated from the Naval Reserves and found my self in Kuwait for the last 10 months. To my surprise when I returned I was in shock ..."Like Every One Else" over the housing market and the price of gas ! WOW what a year can do. We purchased in Murrieta 12/15/06 for $478,000 and just last week the County assessor had us valued at $384,000... very modest considering that the county would like to keep our taxes instead of losing them. I love the location of our home and when we purchased we never intended to (get rich quick) ... It was long term. I am just concerned that when all the neighbors start to walk away from there homes.... because they are ... My justification for waiting out the market starts to waver. I have been reading all about the FED trying to help the home owners that are on the verge of foreclosing by helping them with promise notes or $$$ against what there homes are worth now to refinance into fixed rates. My question is they love to use the term "struggling home owners" does that mean the home owner that has decided not to pay there mortgage for months and are ready to walk away or does that mean they will take a consideration all homeowners that would like to better there way of life by renegotiating there home loans."

Back to personal responsibility. If you are a homeowner and you truly can't afford to make your new adjusted loan payments then a Loan Modification is what you should be looking into, NOT walking away from your commitment and obligation.

A Loan Modification is a negotiated change in the terms of a mortgage in order to meet a of homeowners current situation. A homeowner has to show TRUE finanical hardship and document their hardship as well. Your loan terms will be negotiated with your current lender to lower your interest rate, lower your payment, forgive past due balances and late fees and possibly even lower your principal balance.

Hardship has to be in the form of lost employment, military service, death of a spouse or co-borrower, failed business, job relocation, illness and divorce are a few of the reasons for hardship. In addition to submitting all of your monthly bill statements, you will need to write a hardship letter and document that actions that you have taken thus far to remedy your situation. Although this isn't necessarily Easy, it's the right way to go about improving your situation.

The cost of a Loan Mod can vary and I can only speak for my company but if we don't think someone qualifies for a modification after reviewing all of the necessary documents then fees will be refunded.

I'm sure we will be hearing a lot more about Loan Modifications over the next few months. I'm always open to questions so don't be shy.