If you know someone that's behind in their mortgage, it doesn't mean they will be going into foreclosure.
A study back in 1991 done by Boston Federal Reserve Bank members Christopher Foote, Kristopher Gerardi, and Paul Willen determined, of the more than 100,000 mortgages that were underwater only 6.4% went into foreclosure by 1994.
In this housing down trend, will it be different? Look at all the 100% financing on homes that are out there. Look at all the sub-prime loans. it is difficult to walk away from a home where you put 10-20% or more down on a home. most people fight to keep that house and work through the tough time.
When you never had any equity and suddenly you owe a significant amount of money more than you could sell the property for, it is much easier to walk away. I heard someone say once that "I rented my home for a few years, if I sold it for more, good for me. Since I'll be losing thousands, I'll walk and let the bank take the loss."
An unbelievable thought process.......
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