Walking away from your Home Mortgage – Not without Consequences
Posted By Larry on November 5, 2009
As the value of real estate is continuously depreciating, more and more people are resorting to “self-help” measures to get out of sky-high mortgages – except that such measures are not only harmful to their own interests, but are also further devastating the economy.
A recent article in USA Today entitled “More walk away from homes, mortgages,” noted that homeowners are increasingly engaging in “strategic defaults” or voluntary foreclosures, whereby they simply walk away from their mortgages. When they realize that their mortgage is worth more than the value of their home, they just stop paying and let the bank take their home. Many homeowners would prefer instead to rent a small apartment for less than half their monthly mortgage payment.
But however attractive its benefits are, strategic default is a BAD idea! Among other things, including a deficiency judgment, walking away from your mortgage will knock 100 points off your credit score and make your ineligible for a new mortgage for seven years – not to mention, less likely to be approved for credit in any other capacity. According to USA Today, almost 600,000 borrowers walked away from their homes last year, slowing the recovery of the housing market and, thus, the overall economy.
If you are considering strategic default, or feel it’s only a matter of time before your lender gets around to foreclosing on your home, you should contact an experienced Florida real estate attorney, who can help you determine a more constructive course of action. For example, your attorney may help you negotiate more affordable terms into your mortgage, or, alternatively, cause your lender to discharge what is left on your mortgage (deficiency) after you turn over to it the proceeds of a short sale (i.e. where your home is sold for an amount that is less than the value of your mortgage). All in all, your attorney may help you avoid the dire consequences of strategic default.
If you would like more information about this topic, you may either post a comment to this blog, contact me, a Florida Real Estate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.
Your article was interesting. However, what happens to us folks who’ve tried all resources and the bank has not negotiated, has filed with the court and we do not have money to spend on lawyers. Can we try to short sale in such circumstances? Short sale was the last proffesional advice received, but can we do that being that a lawsuit has been filed?
We had a short sale approved and had $84K cash. The bank changed their mind at the last second and put the house on the market after they foreclosed on us for $64K. I dont think having a lawyer will change the mind of the banks. They want to take the homes from us, from the people that try so hard to pay and cannot, try so hard to talk and renegotiate our loan, try so hard to sell and cannot (owe $180K house is worth $80K), and try so hard to find buyers for short sale and when we do, they say NO. If it is different with a lawyer that means there is some kind of sneaky process that the lawyer knows about and the people with the problems do not. If things were more transparent maybe we would be able to work with the banks instead of having to put more money on the credit card to hire a lawyer.