Wednesday, June 3, 2009

Walking Away from a Mortgage

I’ve had several phone calls in the past 10 days or so that are truly worrying. These have been from homeowners who aren’t having trouble paying their mortgage but say they are thinking about walking away from the house anyhow.

Financial writer John Maudlin noted this trend in his recent email:

Another problem is that with home prices continuing to fall, more and more borrowers, who are essentially just renting their mortgages now because they will never see any home equity, are walking away.

NPR also noted an interesting side-effect of these so-called “walkers”:

Foreclosure leaves a large black mark on a homeowner's credit rating. It might be as long as 10 years before they can qualify for another mortgage.

But Nicole Gelinas — a financial analyst, [contributor to The Wall Street Journal] and contributing editor of City Journal — argues that if enough people walk away from their homes, then banks won't blacklist all of them. (emphasis by ThePhoenixAgents, not N Gelinas)

I don’t actually have anything witty to say about this topic. Lately it’s just the thought that wakes me up in the middle of the night. Figured I’d toss it out there and see what folks are thinking.

What’s your take? Would you walk away from your home – even if you can afford the mortgage payments – just because the value has fallen so far you don’t have equity? Please comment.

Update 10:11 am Arizona time: Twitter Poll is in progress.

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