People Walk, Allowing Their Homes to Foreclose Instead of
Choosing a Short Sale
More than 11 million people owed more on their mortgage than their home was worth, causing the spread of strategic default. Many professors at some of the major universities are studying the walk-away movement and it causes. Thus, strategic defaults are growing at an alarming rate.
Professor White, from Arizona, wrote a paper on these strategic defaults and ended the paper urging borrowers “to stick it to their lenders” and default. He stated that severe negative equity is the reason people walk even though they feel that it is morally wrong.
These people go through an emotional cycle which starts with anxiety and nervousness and progresses to pessimism and hopelessness. When they finally contact their servicers (Banks), in the middle stages of their problem, they are met with unresponsive servicers or told that they do not qualify. Until these servicers develop a solution to the problem, this situation will continue.
Many state’s numbers are incomprehensible, for example 75% of all loans are under water in Las Vegas, and they are running a close second in Arizona. According to CoreLogic, who tracks the numbers, our state is close to 40% and growing.
White’s solution is for mortgage companies to make mortgage payments equal to the rental for a home of equal value. It seems like a good plan, but they won’t write down any of the principals and it doesn’t pay if they refuse to do this. President Obama should have used the money for that, instead of giving to the banks which caused the problems in the first place.
Learn what you can about short sales before you walk away, which can allow you to buy again within two years. Obviously, the cost of homes will still be much lower than your mortgage is now which will allow you to have an opportunity to start again. So see a certified specialist and remember that you should never pay an agent for advice.
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