When turning your back is an option
When mortgages become impossible to pay, some voluntarily walk away from their home. Others may have struggled to pay their mortgage, but are pushed to the limits when they realize that the best option is to abandon the house and dump their financial obligation. Whatever the circumstances, it is not easy to walk away when you are facing foreclosure.
Beware: there are plenty of “private” foreclosure firms ready to help guide your decision to leave the house. These are mostly scams that will only push you to the brink of financial collapse. In fact, many have been victimized by their convincing tactics. Should you seek help, reputable non-profit organizations are available to provide support without having to worry about their legitimacy.
How does the recession influence homeowners in their decisions? The University of Chicago’s Booth School of Business, and Northwestern University’s Kellogg School of Management, recently conducted a survey among homeowners regarding their preferences when it comes to default strategies. The study found that 26 percent of the 2,000 surveyed households opt to default because of the negative equity that they carry. It further states, “… Moral precepts keep many financially struggling homeowners out of default, but only to a point. Fully 81 percent of household heads said they think intentional defaults on mortgages to be morally wrong. But that high percentage begins to crumble as negative equity grows. When negative equity rose to $50,000, 7 percent of those who consider strategic defaults to be immoral said they’d walk away. At $100,000 negative equity, 22 percent would do so. At negative $200,000, 37 percent of those with moral objections would nonetheless default, and at $300,000, 38 percent said they would.”
Here’s a couple who explains their decision to stop making mortgage payments because of their house’s falling value. Check this video and judge for yourself:
And the situation is getting worse. RealtyTrac announced that “… foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 360,149 U.S. properties during the month, an increase of nearly 7 percent from the previous month and an increase of 32 percent from July 2008. The report also shows that one in every 355 U.S. housing units received a foreclosure filing in July.”
One thing is for sure, it takes decades to recover from foreclosure and the growing number of homeowners facing this prospect will further weaken the economy.