Could you walk away from your mortgage.

[So_Money]

No, no, and no would I walk away from a debt I owe. I didn't buy a house I couldn't afford anyway, but people really should be held accountable for their actions. Owning a home is a luxury not a right and some day people will realize that.

 

[MEM]

My sister has not paid her mortgage in over 3 years, since her now ex-husband walked out and said he had fallen in love with someone else. My sister is still in her home! Her home was supposed to be put up for sheriff's auction several times but each time the auction was cancelled. She and her former husband bought the house 20 years ago for about $88K and could have paid off the mortgage several times over. Instead, they used the house as an ATM machine and the mortgages are at least 60K more than what the house might sell for.

My sister will eventually move in with our mother who has already said she will be leaving the family home to my sister when she dies, so sis is not left homeless. What sort of lesson has my sister learned? Nothing, apparently.

 

[wdwfan16]

My sister has not paid her mortgage in over 3 years, since her now ex-husband walked out and said he had fallen in love with someone else. My sister is still in her home! Her home was supposed to be put up for sheriff's auction several times but each time the auction was cancelled. She and her former husband bought the house 20 years ago for about $88K and could have paid off the mortgage several times over. Instead, they used the house as an ATM machine and the mortgages are at least 60K more than what the house might sell for.

My sister will eventually move in with our mother who has already said she will be leaving the family home to my sister when she dies, so sis is not left homeless. What sort of lesson has my sister learned? Nothing, apparently.

And as soon as you mom dies the sister will get a mortgage on that home and start down the same path.

I know somebody who was given a paid for home by her mother and three years later lost the home. She borrowed and spent like a drunken saylor, just like she did all of her life.

 

[eyeheartgoofy]

Strategic defaulters? Cool, deadbeats have a new name.

 

[eliza61]

But how can they qualify for that stuff? Even a renting situation they generally check your credit don't they? Several years back in the first IT bust, DH was out of work for a LONG time. We weren't sure if we could keep the house. Thankfully at that time we at least owed less than it was worth, but I still wondered if we lost the house if we'd even be able to find somewhere that would rent to us.

Even now rentals are not as stringent as purchasing. Look at it this way, I have a rental property. I have to pay a mortgage on it, so if I don't have a tenant in that property I'm paying that mortgage out of pocket. So some times I may be less strick on their credit score as a bank. I will check work history (can they hold a job, or bounce place to place) I will also look to see if the bad payment is a recent thing (maybe due to a layoff or medical problems) or if they have had problems paying onto for the last 10 years.

 

[MEM]

And as soon as you mom dies the sister will get a mortgage on that home and start down the same path.

I know somebody who was given a paid for home by her mother and three years later lost the home. She borrowed and spent like a drunken saylor, just like she did all of her life.

Oh yes, I totally expect that. Her ex-SIL did the same thing and turned an inherited home into her "dream" home. The same woman gets food stamps and WIC for her 5 kids. It sickens me.

 

[DawnM]

My neighbors just forclosed. They were so far stretched. Bought their house for $600K and then immediately took out a $200K loan to fix it up! Their house looked like a magazine, but then they walked away.

I couldn't do it, but I wouldn't take out a 100% loan anyway.

Dawn

 

[rszdtrvl]

Our "certified value" of our home is $67,150 (land = $15,300 & building = $51,850) and our mortgage balance is $72,238.

We have owned our home for 6 1/2 years, and recently values went down. We are in "timber country" and with all of the wood mills shutting down, our property value also went down.

I don't see that necessarily as a bad thing though.

Our property taxes went down, and our mortgage (which also includes escrow and property taxes) per month is approx. what an apartment would cost us. Plus, we have a HUGE backyard and are in a nice neighborhood.

I could never just walk away from our house because the assessed value is less than our mortgage balance. We are in it for the long haul, and don't ever plan on moving!

 

[summerrluvv]

Read the IRS website. They talk about it and it is not as she implies. There are cases where it is written off but many will not be.

I work for a law firm. Nothing to do with the IRS laws.

Through a Chapter 13 bankruptcy a person can get the second and third mortgages eliminated. If the house appraises more than the balance of the first mortgage, there is nothing for the 2nd or even 3rd to attach to as a lien Therefore it's "crammed down" and treated as an unsecured debt and the debtor pays pennies on the dollar during the life of the Chapter 13 plan (usually 3-5 years). It's not COMPLETELY wiped out, a person would pay a VERY minimal amount IF the bank files a claim. Obviously if you are just underwater and have no second or third mortgage it doesn't work.

 

[summerrluvv]

Out of curiosity, how on earth do they do that? Those companies just get written off??

The whole thing really makes me mad. We live in Mich, where the economy has been bad for several years now, even before we made the news! We have so many friends and family who are or have been out of work (including us) and there are so many people struggling to get by. These people living in NORMAL houses who are really trying to keep them, and then you have these who are trying to cheat the system. I did have a friend who took advantage of things and left her house and bought a much nicer one, we are no longer friends, I just have no respect for her anymore. We couldn't sell our house even if we took a huge loss on it, there are just too many foreclosures to compete with. Just scares me that we are trapped if something happened and we had to move for a job, but otherwise, we just keep paying and I try not to look at what houses down the street are selling for!

What gets me is, these people will still have to pay back the money, right? I mean, a mortgage company isn't going to just "forget" that you owe them $100k or so. They'll track you down eventually, what happens then??

I explained above.

My family lives in MI, and a couple of years ago my sister and her husband lost the house they built themselves. Sucks, but he owns a hardwood flooring business that had zero business because of the the economy. My mom works in the mortgage industry in MI and is also struggling.

 

[KibbyCat]

 

[mistysue]

I don't understand at what point the "appraised" value of a home became such a concrete figure to people. You decide how much a house is worth to you the day you buy it. You have to come forward and say "I buy this house for X amount" Then you start paying back some guy who gave you the money up front. You decide the price and make the deal yourself, people are not a victim of an expensive house. Nobody held up a gun and MADE you buy your home for a higher price. The price may go back up, nobody really knows, but either way if you buy a house it is your responsibility to pay it back no matter what some lady with a spreadsheet "thinks" it is worth.

I paid $250 for my Wii, I'm not running back to Target demanding that they pay back my $50 because the current price dropped or else I will steal the $250 from them and leave the consul in the parking lot... It makes no more sense with a house than with any other merchandise you buy.

People taking out a loan to buy themselves toys they can't afford based on a home appraisal is stupidity in any market. If you can't afford it, then you can't afford it. That doesn't make it alright to screw over everybody else because you are irresponsible.

 

[taximomfor4]

I do know someone walking away from her house. She had to move to find employment at 60 yrs old...TWO timezones away. Her house is a little starter home in a decent suburb. She refinanced the house when her husband left her, so she could keep it. She could, at the time on just her income, only find an ARM quickly enough to keep the house (with minor grandchild in the home still). Since she moved 2 yrs ago, she's been trying to sell the house. NOTHING. It's "worth" $100,000. She only owes $50,000. She put nearly $30,000 into it trying to make it easier to sell (including 2.5 yrs of payments for nobody to live there)...but thank goodness did that in cash over several years. Still won't sell. Her balloon is due (whatever its called). For 7 months she has paid for appraisals, etc, loan paperwork, etc. The bank is so slow to reply that it has all fallen through TWICE. She has contacted all kinds of people trying to NOT walk away. Finally, 3 weeks ago, it "fell through" again even though she met every deadline. She is now walking away. She needs her knees replaced, but paying for 2 homes has not allowed her to save the money to take several months off work. The bank will certainly sell the home for more than the $50K she owed.

She even looked into renting the house out, but she can't put tenants into a house that she can't seem to get a mortgage on!

when my father passed away last year, the first financial thing my stepmom did is consult a bankruptcy lawyer. She is filing and letting that house go. THAT one I am much less understanding of. That house has been refinanced many times and is mortgaged to the hilt (my dad never knew though, it was only stepmom's house...he just gave her bill money each payday).

So I guess I am saying I will never say never. Sometimes peoples' backs are up against the wall. Sometimes people are taking the decision a bit lightly but sometimes people just HAVE to give up.

 

[Mrs. Charming]

I had more than one opportunity to buy a house back then. I never did. I knew it was something I couldn't realistically afford and I know the bubble would burst. Right now, I am very happy in my rental apartment and am currently saving to buy a condo that I can afford.

Same with us, and like Bumbershoot said, we had a lot of peer pressure on us too, especially as a newly married couple back then. I'm SO glad we didn't, and we're seeing my MIL go through all this crap because she bought into it, bought a house that wasn't worth crap for well over $200k.

 

[Mrs. Charming]

*snip*

So I guess I am saying I will never say never. Sometimes peoples' backs are up against the wall. Sometimes people are taking the decision a bit lightly but sometimes people just HAVE to give up.

That's very true, sometimes you're just up a creek without a paddle.

 

[big_red_s]

Living in NJ most of my life, and currently living in Middlesex County (the same as the author of the article) I have to say that IN NEW JERSEY walking away from your mortgage might be a sound financial strategy.

Of course it depends per individual, but our property taxes here are insane. People aren't struggling to pay the mortgage as much as they are struggeling to pay taxes, fees, tolls and whatever else the NJ government is throwing at us (by the way, just so they can spend like drunken sailors).

My property taxes went up 20% this year and in a few short years (2-5) the average propety tax in NJ will top $10K.

I have to admit that simply putting the keys in the mailbox and walking away has occured to me - but I'm not that kind of a person, yet isn't the economic system in the US is based on us cheating one another?
Getting as much money as we can with giving the least amount of value.

By the way - the day that my property taxes will be higher than my mortgage payment (for many NJ households it already is) is the day that I will most likely walk away.

 

[wdwfan16]

I work for a law firm. Nothing to do with the IRS laws.

Through a Chapter 13 bankruptcy a person can get the second and third mortgages eliminated. If the house appraises more than the balance of the first mortgage, there is nothing for the 2nd or even 3rd to attach to as a lien Therefore it's "crammed down" and treated as an unsecured debt and the debtor pays pennies on the dollar during the life of the Chapter 13 plan (usually 3-5 years). It's not COMPLETELY wiped out, a person would pay a VERY minimal amount IF the bank files a claim. Obviously if you are just underwater and have no second or third mortgage it doesn't work.

A bankruptcy is different than just walking away from the home. The later gets one a 1099 and taxes in many cases.

 

[TheRustyScupper]

But how can they qualify for that stuff? Even a renting situation they generally check your credit don't they?

Even now rentals are not as stringent as purchasing. Look at it this way, I have a rental property. I have to pay a mortgage on it, so if I don't have a tenant in that property I'm paying that mortgage out of pocket. So some times I may be less strick on their credit score as a bank. I will check work history (can they hold a job, or bounce place to place) I will also look to see if the bad payment is a recent thing (maybe due to a layoff or medical problems) or if they have had problems paying onto for the last 10 years.

1) We have several rental properties.
2) Actually, these fund our current retirement.
3) For all serious tenant applicants, we use a third-party to ALWAYS check their
. . . credit history
. . . personal and marriage/divorce history
. . . employment history
. . . criminal history
4) Like eliza61, we have lessened our requirements due to the economy.
5) But, we have definitely not abandoned them.
6) For ugly credit, we want the applicant to fully explain the issue(s)
. . . reasons for any bankruptcy
. . . reasons for any slow-pays
. . . job loss, income loss/reduction etc
7) We then make a judgment as to whether the applicant turned it around.
8) If the reasons/cures sound good, we can usually take a chance

NOTE: If we find any "mortgage walk aways" on the reports, we immediately drop that applicant. We believe walking away from a mortgage is a childish, cowardly, and irresponsible thing to do. And, they do not deserve to rent one of our properties.

 

[locolala]

My husband would lose his job if we did this. Heck, we were 2 days late on a house payment because I was in the hospital and DH's command got a phone call from the mortgage company asking why we hadn't paid it. Not a good idea. You will never be able to get a good job with that on your credit.

 

[HeatherC]

I may get slammed for saying this, but to me it is almost like stealing. If you buy a house..it is your responsibility to pay for it. I understand how many people are upside down with owing more than the house is worth. But...they still bought the house...they should do everything they can to pay for it.

Are there a lot of instances where people have lost their jobs and can't simply continue making their mortgage payments? Of course and for those people I feel awful. Sometimes it is simply impossible for people to continue to do so.

I'm talking about these fools that have over extended themselves with big fancy homes and fancy expensive cars that cost almost as much as a house and all the fancy expensive toys in the house. Should they be allowed to walk away...NO WAY!! Sell all the other crap they have to make those payments. Why the heck should the rest of us (society) pay for their mistakes.