Just Walk Away
02/19/2008 – 4:53 pmA growing trend in today’s market are homeowners that choose to walk away from their mortgage payment, not because they can’t afford the home, but more so because of loss of equity.
This is even more of a reality for those that ended up borrowing 100% for the purchase. Some reason if I purchased a home for $750,000 and still owe close to that amount, and now it’s worth $620,000, why should I keep paying? Many are not. In fact, there is a rise in businesses that are servicing this market. For example http://youwalkaway.com/index.html.
Mortgage lending is based on risk aversion. With the last iteration of mortgage lending investment bankers felt that this “risk” was calculated into the interest rate and diversified by pooling loans and selling them to Wall Street. Sheer competition and greed allowed it to spiral out of control.
With the shake up of mortgage lending we’re back to the basics of assessing borrower’s on credit, collateral and their capacity to pay the loan back. This does make it harder to qualify, however, with falling home prices that may soon alleviate that pressure for some.
What gets me is that the company stated above even advertises that it can remove the foreclosure from your credit. Can this be done? I’ve seen instances of this happening, I am unsure if they can. They also state that you can live in the home for 8 month without paying.
Ultimately, someone ends up paying for this and many times it’s not just the big banks. With legislators facing election years and many looking to blame someone or some group, we’ll continue to see quick legislation trying to give a speedy remedy. An unfortunate consequence maybe that as tax payers we may share the burden of those that just walk away.
www.PremierOcHomes.com