Bailout

The happy kind of mortgage default

By Felix Salmon

Many congratulations to Mark Whitehouse for writing an evenhanded and even positive article about walking away for the WSJ. He says that “a growing number of families are concluding that the new American dream home is a rental”, and talks about Shana Richey, a schoolteacher who took a $430,000 no-money-down mortgage in 2004 on which she was making payments of $3,700 a month.

Wells Fargo offered Richey a modification down to $3,300 a month, but then she found a larger, nicer rental for $2,195 a month, which includes not only a swimming pool but also the cleaning of that pool. It was a no-brainer, especially since California is a non-recourse state:

Ms. Richey’s family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March… “We’re saving lots of money,” Ms. Richey says.

Good for her. In California especially, no one should pay vastly more for their housing than they have to.

Full post as published by Macroprudential on December 12, 2009 (boomark / email).