The Cost of Not Walking Away From An Underwater Mortgage

In the ongoing debate about whether one should walk away from an underwater mortgage or not, one University of Arizona professor speaks out strongly in favor of taking a hike. According to Brent T. White, an associate professor of law at the University of Arizona:

A failure to grasp the true economics of the situation is holding back many Americans whose home values have dropped far below the amount they owe and who would be better off renting, Mr. White says. Fear, shame and guilt also are preventing rational decisions, he believes. And, he says, those “emotional constraints” are encouraged by politicians and bankers, who ruthlessly and amorally follow their own economic interests while telling Joe Soggy Homeowner he has a moral duty to pay his debt so long as he possibly can. Continue reading “The Cost of Not Walking Away From An Underwater Mortgage

Why We’re Walking Away

I posted yesterday on the Wall Street Journal article Report Sheds Light on Why Homeowners Walk Away. A couple of commenters on the WSJ article said why they were walking away from their mortgage, and I thought their comments were interesting enough to repeat. The first walker says that as a good borrower he is unable to have his loan modified, the second blames bank policies:

The banks (my lender is CITI) are unwilling to modify mortgages for the people able to pay. I suspect if the people underwater, but with money and good credit – you know, responsible people – were able to secure a more reasonable APR that made their monthly payments less painful, they’d more easily tolerate paying on that over-valued house. Continue reading “Why We’re Walking Away