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Posts Tagged ‘mortgage underwater’

Here’s a statistic I bet you have heard before, one in four mortgages are underwater.  So the question is given that the house is an investment loss, do you walk away?  A  CNN Money article interviewed 5 homeowners and asked that same question.   To homeowners a house is more than a house, it’s a home, and many of them have decided to stick it out and keep the home.   One lone couple has decided to walk away, citing attempts to work with the bank for a principal reduction of $100K, and when that didn’t work letting it go to foreclosure for a $250K loss to the bank..   Hah, banks are not giving out principal reductions .. at least not that I have heard of.  Banks are playing hardball and not giving up much ground, although you would think they would work harder to avoid foreclosure.  After all, who got the bailout money?

I read through the comments, and most of the peanut gallery was upset with the lack of responsibility people are showing by walking away from their homes.    While I sympathize with the sentiment (or may I say jealousy), is it really a lack of responsibility, or just a sober and difficult financial decision?  Let’s see, I could run through all my saving and go broke or I can jettison this asset that the very bank that lends on it caused a credit crisis that caused it’s value to drop beyond all the worse case scenarios I ever considered.

I thought the commenter that professed disbelief at the 50% drop in value was cute.    I recently received an offer of $55,000 for a house that has a $186K note on it.  I should be lucky to only have a 50% drop.

 

 

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