Loan Modification

Walk Away From Your Home, Advises Report

By Doug Jacobs

An interesting report by a University of Arizona Law professor is causing some stir in the real estate industry.  Professor Brent T. White suggests that homeowners who are seriously upside down in their home should just walk away.

According to Professor White, since the homeowner won?t recover any equity in their home for years, they should stop making the house payments, prepare for a year or two of tight credit, and move out when they have to.  In that way, they will stop throwing money down the drain trying to save a house that is worth a great deal less than the market value, and that won?t return to the value of their loan for many years (if ever).

Professor White suggests that this may cause the housing industry to take a fresh look at how they do things, and ultimately may get them to reduce the loans to a reasonable level and keep people in the houses.  But, he urges, without the homeowner?s willingness to walk away, this won?t happen since the lenders are getting paid on the loans.

Homeowners currently are reluctant to take this step, Professor White suggests, because the mortgage industry has droned into consumer?s heads that it is ?wrong? or ?immoral? to default on your home loan.  It?s not, he declares, and the homeowners have a valid right to walk away.

In many states, including California and Arizona, there is no deficiency allowed on a foreclosure and therefore the mortgage company can?t pursue the homeowner.  But even in those states that allow such deficiency judgments, like Florida, the lenders might decide not to go forward because of the cost of litigation and the difficulty in collecting such a judgment.

Related posts:

1. Can Chapter 7 Debtor Who Did Not Reaffirm Mortgage Walk Away Without Penalty After Discharge?
2. Should you “walk” away from mortgaged home
3. Can I Just Walk Away From My House and Mortgage?

Full post as published by Mortgage Law Network on November 30, 2009 (boomark / email).