More Walking Away From Mortgages

By: John Lund Email
By: John Lund Email

Foreclosures are nothing new to Michigan. But the reasons homeowners are finding themselves in the situation have changed.

"Where it started out as a crisis with people with subprime mortgages, that is no longer the case," said Neeta Delaney, director of community foreclosure coaltion at Community Action Agency. "Now, its much broader. It's expanding. It's including people of all walks of life. All education levels. It's involving homes of all values. And neighborhoods of all kinds."

Mortgage foreclosure experts say walking away from a mortgage doesn't have to be the answer. In fact, there's many other options available.

"Probably close to a third of people that are actually in that kind of situation where there actually are at risk of losing their home or walking away from it are people who can afford their mortgage," Delaney said.

Delaney said bankruptcy, deed in leau, short sales, forebarance and loan modifications are all alternatives to choosing to walk away.

In June, mortgage giant Fannie Mae announced policy changes that it hopes will stem the tide of strategic "walk aways." Experts are finding there is a growing number of homeowners who are employed and who can afford their home, but are chosing to move to perhaps a larger, but cheaper home.

"People are walking away consciously. They are making a choice to do this. So they are putting a 7-year moratorium on anyone that's caught trying to walk away," said Fred Parker, Jr., of the Community Action Agency. "They will not be able to get a Fannie Mae-backed mortgage for seven years."

Experts say Fannie Mae's hope is that the moratorium prevents homeowners from walking away from their home and destabillizing neighborhoods and home values.

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  • by Anonymous on Aug 27, 2010 at 06:43 AM
    All of these people who bail out on their mortgage are theives. They made a contract knowing fully well that they will not honor it.
  • by Dan Location: DeWitt on Aug 26, 2010 at 03:30 AM
    Well, I can't really make much sense of that. However, what I can make out I will comment on. Contracts are not meant to be broken. That's the very nature of why contracts exist, to hold people to their commitments. I highly doubt that there's an escape clause in your mortgage that allows you to screw the bank because your overly expensive house lost its value. That's what happens when you make an investment (in this case real estate,) you can't predict the future and even something that was supposed to be a "sure thing" sometimes blows up in your face. Bottom line you shouldn't have a sense of entitlement that you get to walk away because you're upside down on your house value. That's the problem with this whole generation. They think that there's a way out of everything and that they don't have to take personal responsibility for their own decisions.
  • by guy Location: stockton california on Aug 25, 2010 at 02:47 PM
    contracts are ment to be broken just do some research of the banks be smart enough to play there game i owe 285000.00 on a house that is woth 60000.00 tell me who is dumb i have lived in the banks home for 18 months not paying a dime keep applying for a loan modification and the cant forclose on you and you can save enough money to pay cash for a house now at the price your home should have been in the first place by doing that neighbors home values goes back up also
  • by me Location: lansing on Aug 25, 2010 at 09:52 AM
    I myself made the decision to walk away just recently. Apt living w/24 hr maitenence and cheaper utilities, and BETTER SCHOOLS, Im am at a minimum 45,000 upside down, didnt get anywhere w/modification, dead in leiu etc. and it affects your credit rating regardless. THERE IS NO HELP FOR THE MIDDLE CLASS I gave myself a bail-out.
  • by Dan Location: DeWitt on Aug 24, 2010 at 11:21 PM
    Bailout of the banking industry aside, you still made a choice when you bought your home. You sign a contract agreeing to pay a set price for the home that you have purchased. I'm not happy that the home I purchased six years ago is only worth 80% of what I bought it for, but I refuse to be a scumbag who walks away and sticks someone else with the bill just because things didn't work out the way I wanted them to. I signed a contract, and I will do what I must to live up to my end of it. If you walk away from a mortgage and you have the ability to pay it, you should not be able to get another mortgage for a bigger and better home. There's not much that Fannie Mae has done over the past few years that makes much sense, but this does and I support it.
  • by kelley Location: fowlerville on Aug 24, 2010 at 09:04 PM
    Why is there no help for the people. I now owe $60000 more than what my house is worth. I have tried getting a loan modification and was told I dont qualify, the company then said we could try a short sale but would still owe them $20000 at the end of the sale and it screws up your credit, didnt qualify for the forbearance either. And what about those who have lost their jobs. What choices do they really have. It all comes down to government helping business because business gives them money.
  • by The Man Location: Lansing on Aug 24, 2010 at 04:56 PM
    I know of a couple who actually bought a 4200 sq.ft. house and then immediately stopped paying their mortgages on their two condos... Makes me sick to find out that they could go through foreclosure on two home and still end up with a nicer home... Not to mention it was a federally backed loan on the new house! Pathetic...
  • by Dave Location: Lansing on Aug 24, 2010 at 02:48 PM
    I find this again a double standard from the banking house is under water by over 30% and it will take YEARS to break even, yet our government has bailed out the banking industry and they continue to stick it to someone that is walking away from a dead horse.......a horse/house that the banking industry killed, not the home owner. I think government needs to look at the cause people are walking away,,,,does it make sense to pay for something that is under water for the next 7-10 yrs? Would the banking industry pay for something like this?? I doubt it.
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