Got An Upside Down Mortgage? Would You Foreclose and Walk Away From Your Mortgage?

by The Smarter Wallet on March 7, 2009

upside down mortgage, walk away from mortgage, upside down house, underwater

Got An Upside Down Mortgage?

It’s hard to believe that it was a mere couple of years ago when homes were selling like hotcakes with multiple bids. Back then, I was wondering when we’d be facing the end of the real estate bubble. Well, many of us are now living the American Nightmare: thanks to the real estate bust and subprime mortgage mess, we face foreclosures and worry about our unemployment checks running out, while we try to manage job loss and avoid debt collectors.

These days, we’re now talking about how people are facing the prospects of walking away from their upside down mortgage, or a mortgage that keeps them financially underwater. Here’s what’s amazing: reports are stating that 20% of homeowners (or 1 in 5 families) now owe more than what their properties are worth.

What’s frustrating to me is that this was something many of us could have probably seen coming. Many of us probably anticipated that the market would eventually receive its comeuppance sometime in the future, given how crazy prices were back then, except that we didn’t do anything about it. At least I didn’t. I still remember a moment when I was tempted to call out the peak of the real estate (and stock) market (I was actually spot on, in hindsight), but still remained fully invested in the stock market. Oh well… we can only wish we can turn back time and do things over.

Now believe it or not, when a basic cost-benefit analysis is done, it makes more sense for people to actually walk away from their devalued homes. But for those who are now wallowing in negative amortization and upside down mortgages — the surprising fact is that they’re actually sticking it out. There are people have chosen to address their debt and loan problems by working to consolidate debt or by signing up for loan modification services instead of walking away from their obligations. As behavioral economics would have it, most people don’t make the rational decision of moving on and cutting their losses. Now why is that?

Why You Probably Won’t Foreclose and Walk Away From Your Mortgage

Why is it that most people will prefer to stay put and will refuse to walk away even if it’s in their best financial interest to do so?

1. There’s this thing called the “endowment effect”, where homeowners have the tendency to value their homes above their market price. Because people don’t want to admit they’ve actually lost money, they’d rather stick things out and avoid selling at a loss.

2. Homeowners place more importance on immediate outcomes than they do long-term effects. Now what does this mean? There’s a visible cost to walking away that people anticipate right away, while they don’t see very much material benefit to actually abandoning their homes. The impact of walking away (there’s effort, time and money involved) has an immediate negative effect whereas the positive impact isn’t easily felt until possibly later. Hence, people will wrongfully assume that there’s a heavier cost to walking away than it is to staying put.

Check out this interesting article on this difficult dilemma. What would you do if you’re faced with an upside down mortgage?

For those who’d like help with an upside down mortgage, you may want to consider modifying your loans or seeking help with debt management. Some possible services include those provided by:

But always do your due diligence before signing up with any service.

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{ 51 comments… read them below or add one }

1 Georgette March 7, 2009 at 8:03 am

How about NOT walking away because it is ethically wrong to do so?

2 DG March 7, 2009 at 9:42 am

I think a lot depends on how upside down you are. In places like CA where homes have went down 60% and people put no money down the financial difference between walking away and staying is so huge you’d be a fool not to walk away. The Obama housing plan is insulting with its 105% LTV ratio when people like me have a 220 LTV ratio. I don’t think I was any less responsible than others especially given I refused to take out an arm when the bank said these were the only loans they were really doing. Yet because I bought at the worst time in 06 and I live in one of the hardest hit areas in the country I am eligible for nothing. I don’t particularly like his plan anyway because it only involves an interest rate reduction leaving you terribly underwater. I will walk and rebuy in a few years for 1/3 of what I originally paid.

3 Manshu March 7, 2009 at 2:17 pm

I lost a bit of money in hedging against a stock market decline. The trouble was I bought options to hedge against the markets when I should have just sold everything out. I was greedy and I paid for it. It was an expensive lesson.

4 Greg May 18, 2009 at 6:29 pm

People need to give up the ethical argument. That shouldn’t be a consideration at all. The banks and brokers weren’t ethical during these times and loaned money on overvalued homes to people who shouldn’t have bought in the first place. As usual, the middle class is getting screwed here. I bought in 2006, fought the mortgage brokers who were trying to push me into an even more expensive house. I made a wise decision of buying something I could actually afford, and still can. However, after a $120,00 freefall in the price of my home, my new Toyota bought in 2007 was actually a better investment and has held it’s value much better than my house. So my solution, stay and pay until I’m ready to move, pay down some credit cards and auto loans, and when I want to move, I’ll walk away. The banks made no effort to be ethical to me so why should I care if I stick them with the loss?

5 CharP May 25, 2009 at 2:33 pm

I feel no obligation to our lender either. At this time, our home is valued at about $60K less than what we paid. We have paid, over the last 5 years, about $60K in interest. What would I have to feel bad about? The problem, we want to move closer to my husbands job, about 25 miles away. I don’t see how we could buy a new home if we walked away from this one. We also spent all the cash we had for the downpayment on our current home, so we don’t have one for the next one. We are feeling trapped, and angry at all the lenders for allowing this situation.

6 ML May 31, 2009 at 3:05 pm

I live in South Florida. My townhome is, as of now, at least $80,000 upside down. I was responsible, got a fixed rate, bought within my means. However, the home is older and needs lots of repairs and should a storm hit this summer, and should my insurance fail to cover the damage or require a huge deductible, I WILL walk. So will MANY. In Florida, lenders can come after you for the deficiency judgment. The fact that I may be sued for deficiency has, heretofore, kept me from walking (I am in a serious relationship with a man who is not a homeowner, and could purchase a place at a reasonable price ). If a storm stuck or I lose my job all bets are off …

7 Kristal June 6, 2009 at 8:33 pm

We own two homes and have paid our mortgages faithfully. We have excellent credit, but if we kept our homes, we’d be slaves to them for the rest of our lives and we’re in our early 40s with a baby on the way. We know it’s wrong to walk way, and up to now, it hasn’t been a consideration, But now that we see we’re being shafted for being responsible and taking the hit for people who did not make wise choices, we’re thinking about walking away. The exorbitant amount of money we’d otherwise be giving to banks who aren’t willing to negotiate our homes down to fair market value is money that could go to our kid’s college education. Sadly, it’s a no brainer between which is right in a very wrong situation.

How can we be blamed or held responsible — whatever you want to call it — for something that was already happening (i.e., credit and bank fraud). It’s not reality — what they say we owe. The value was inflated by money (i.e., instruments) that never existed (the paper lie). Our money, however, is a real and tangible asset; so is the sweat that went into earning it. Therefore, we’re thinking about using it to live a happier life, without great credit, rather than a stressful, worrisome life owning credit and debt. It’s not fair, no matter how you look at it. Credit has changed the terms of morality.

8 Enzo June 13, 2009 at 3:02 am

Not ethical? Sure it is. You agreed to pay the mortgage and if not you agreed to give the house back to the bank. So by giving back the house you have honored your end of the contract. What is unethical about honoring the contract?

9 chaz June 15, 2009 at 12:12 pm

i’m one of those that are staying with 2 upside down mortgages that has gone down about 60% because of the ethical dilema. I agree that the banks are not ethical and could care less about me so why should i care about them. The problem still is with the money that we have put into the mortgages so far….since 2006, we have dumped close to 100K into the two mortgages as a panic reaction hoping to lower the prices due to an adjusted rate but still, the properties are upside down and are worth less then the current market value. We are putting in about 2000K/month over the montthly mortgage hoping to pay off early and save on the interest but this has put us in a tight financial situation….i don’t know what to do…keep on paying until they are paid off or walk away and take my lost!!!! its very hard to decide.

10 Not Buying It July 2, 2009 at 8:21 am

You all have missed the point entirely.

Point 1) The bankers made this mess with leverage on mortgage backed securities.

Point 2) they should have known better than to leverage sub-prime loans at 30-40 even 50 to 1.

Point 3) If I bought a house at a “market price” as represented to me by LICENSED real estate people and LICENSED apparaiser and LICENSED mortage brokers and LICENSED banks….

Then the value turns out to be wrong… by like oh…40%! then how is that MY fault?

They knew what they were doing, and they did not care!

The final point… there is NO moral obligation to support the criminal banking industry … they already got balied out with my tax money… I am calling it even…

TIME TO WALK, and don’t think twice about it.

They (bankers) made this mess… let them live with it.

The next point is… HOW to walk away… There are plenty of options, but the best idea is to stop making payments all together and wait out the 10-16 months until the sheriff comes over with a written invitation for you to exit… then exit and use all the cash you saved as a down payment on your new house.

NOW THAT IS FAIR.

11 Terrin July 6, 2009 at 7:33 pm

I agree. When you buy a house, especially if you are young and never bought one before, you are relying on so called professionals to help you make good decisions. My girlfriend and I made an offer on a house based on what a realtor and then later bank appraiser told us the house was worth. We later found out that the bank appraiser didn’t even come into the house, and miraculously the appraisal came out to just what our offer was. I made fifteen dollars an hour at the time and worked part time. She made thirteen dollars an house, and worked part time. We were told our payments would be about 1200 a month. No one mentioned that after we buy it the taxes would raise making our payment closer to 1800 a month.

I paid 190, 000. Today I can’t get a 120, 000 offer. Worst, I brought a short sale offer to the table, and the Bank refused to agree to not sue us for any deficiency. So, I have no motivation not to just sit in the house free for a year. The reality is the Banks caused this nightmare, and they are making little effort to assist the regular folks to deal with the mess they caused.

12 Wondering How To? July 12, 2009 at 8:42 pm

Hey Terrin and ‘Not Buying It’, can you give me the details on the walking away from it? And more importantly, if you’re late on the payments to the tune of 10-16 months, how do you walk into a new house/mortgage? I’m seriously considering this as the time to recover from the position I’m in could take the rest of my life and I don’t have time for it….

13 leavingsoon July 13, 2009 at 9:34 am

okay, i know people hate the rich, but we were, and probably are, but here is our story. Making 3,000,000 per year for a financial institution. decided to trade up to a 4,000,000 home at teh end of 2006. Bought a house with a 5/1 arm, put 1,000,000 down of our own money, full doc, figured we’d actually pay it down and own it in 3-5 years. Put 250,000 into fixing it up. (we’re in CA). 4 months later Countrywide started unravelling, our stock portfolio took a huge hit. been paying 20,000 per month for mortgage/insurance/taxes since then. Watching our severence dwindle, now have job making 150,000 house could maybe get 2,700,000 i need 3,100000 to pay off mortgage not willing to loose another 400,000 out of my pocket to make up difference. gonna either a) buy another home for around 800,000-900,000 with 50 percent down before we go delinquent, then walk away. or b), since we feel the real estate market will continue to go down, stay here without paying until they kick us out in a year, meantime save up enough money to buy a house cash, or just rent for a year. Why is it unethical? We bought this house with all good intentions. We lost more than a million on it. The bank will lose about $400,000 if they sell it quick, they made out better than us.

14 krj4556 July 13, 2009 at 11:04 am

The last eight years in AZ has been a real estate trip for us and I’m wondering how it all got to this point. In ’01 we bought a townhome for $400 (incl upgrades) with a $120 down and then sold it in ’05 for $725 before costs. We then built a house for $1,150,000 and had a $750k mortgage. We had a $250k line of credit but then paid all that back by selling the home for $1.1mm. We downsized to a home for $925k with $185k equity (20%) down in 2008. Since then our home has gone down to be worth about $725 and we are $205k upside down. I have no equity lines and am current on my $3300 interest only monthly payments. But there is no equity and no chance to refi–the house pmt and upkeep gobbles up about 65% of my take home. It feels as if we are wrapping up the sportscar, the boat, the vacations, the country-club membership (things we would buy if we didn’t have to pay this much) all in the house, which while a nice home, was bought under a different set of rules and expectations. If we walked away, we would likely rent but that would probably cost about all in about $2000 per month with no tax advantages, so what’s the point? My ARM will reset in 2 years and I’m hoping the bank will negotiate with me to keep my payment the same regardless of the rates at the time. There is no hope of creating equity by making extra principal payments and they would be too small anyway, so in a way it feels like we are renting already. I guess I’ll continue to pay until I can’t.

15 Tom July 17, 2009 at 12:36 am

My wife and I bought our first home for $311K. Now the house is worth less than $200K, I am in Las Vegas, NV. Since the economic downturn, my wife is only working part time. Like many here, we were blinded by what was going on and led to believe that we were buying a house at a fair market. It angers me when I hear about Goldman Sachs making billions of dollars in profits with tax payers money. Please read this.

The current situation was a wake up call for me and my family. I do not have any savings and if I were to lose my job, we will be in deep trouble. So, I have decided to see if the Bank will allow me to do a short sale; if that does not work I am going to hand them the key and become a renter. I could actually rent the same house I am currently living in for half of my monthly mortgage. I do not see the housing market improving in another 5 to 10 years here in Las Vegas. In the mean time we can live frugally, save enough for down payment and buy a house which is within our means. Hopefully, our credit will be restored in 5 years or so. What is wrong with that?

16 brent July 25, 2009 at 2:04 am

All of you walkers should have to pay or you should lose your BMW car and all your toys before you can walk away; you wanted all of the upside in an investment and now don’t have to take any down side. Pay your bills!

17 Dan Melson July 28, 2009 at 5:14 pm

Actually there are all kinds of reasons you shouldn’t walk away. You get it precisely backward on where the benefits versus costs come – you get (maybe!) an immediate benefit – mortgage relief – that you’re going to be paying for at least the next ten years.

I wrote this article almost a year ago

http://www.searchlightcrusade.net/2008/10/why_you_should_not_walk_away.html

18 Sharie, A Concerned Mom August 18, 2009 at 11:57 am

My son and his wife bought a home 5 years ago in Northern California for $600k. The economic downturn has been extreme in their area, and their home today is worth only $200k. Their mortgage is $330K. My son has been calling their mortgage lender for the last 4 months with nothing but excuses and pass-the-buck runarounds instead of working with them. Three different families in my son’s neighborhood qualified for the exact same house at 50% of what their current home was worth on just one income, so they bought, moved in, then walked away from the first home. Unless they resort to something like this, I don’t see how walkers will be able to purchase a new home in the immediate future after abandoning their home…

19 Mike P August 23, 2009 at 10:23 am

I WALKED…Here is what happened…

I bought a house for $650,000 with $0 down and it’s an interest only loan. The original loan was bought by Countrywide. The house is today worth $300,000. Countrywide wouldn’t help me; their service was horrible. BofA bought Countrywide and the service greatly improved. I can’t afford the payments anymore so I walked. After 15 months of not paying the mortgage, the foreclosure finally happened.

BofA told me that because they were bailed out by the feds, the will not sue for deficiency or issue 1099, because it would look really bad on their part.

My credit score went from 790 to 550. After 3 months of paying all other bills on time, credit has inched up to 650. However, I had a credit card with a $50,000 limit that was reduced to a $1,000 limit and another card with a $25,000 limit that was revoked. Anytime I turn on utilities or rent a car I now need to make a deposit. Lots of inconvieniences you don’t realize how important good credit is.

The engine on my car blew up and I had to buy a new one. I had to pay 7%APR on a new car. No big banks would loan me money. But a local credit union did; they ignore foreclosure and look at the text of the credit report, not just the score (this is because 90% of the new car buyers had a foreclosure on their reports).

I talked to a few large banks who said they would give me a mortgage againt, but I’d have to wait 2-3 years, all other bills paid on time, no large cc debt, and I’d be paying a few % points higher APR.

Don’t give me the “ethical” argument. The banks screwed us, they caused this. Our property values were artificially inflated and banks threw money at us and sold mortgages also betting. At my loan signing the bank reps kept telling me to lie about my income. If your house has devalued more than 15-20% you should just walk. It makes no financial sense whatsoever to keep paying. You’re basically going to be a slave to the bank your whole life.

20 Michele August 25, 2009 at 6:45 am

RE: How about because it’s ethically wrong?…
Is it ethically wrong for a mortgage company to continue to charge interest on the decreased value? Why are not all parties spliting the debt ( loss of equity) fairly divided by all parties involved~ If a contract is based upon the value being.. x… and that changes drastically does that not change the contract ( if things were all ” ethical”, of course.) Is it ethically correct for banks to be able to reduce the sales price drastically when a home goes into foreclosure but arent willing to work the same way with the current residents PRIOR to foreclosure status. We just recieved notice our home and MANY others in our area just decreased by almost 20% in value in one year. Poof~

21 Jim September 20, 2009 at 4:30 pm

You all knew you were buying a house that was over priced. C’mon, you were greedy, admit it, you were just in it for the profit. Now, when the scam broke, you all want to walk away. Sad.

22 Teri October 1, 2009 at 7:57 am

We live in Northern California, bought a 5 yr old 4 br house that was in foreclosure in ’96 for $80,000. We we excited and couldnt wait to open our home to family. Within 5 years, our house had almost doubled in value. People from the Bay area were buying up houses in our area like hot cakes! The house next door to us that was smaller, sold for $369,000! We felt pretty comfortable and sure of ourselves. Over the next few years, family emergencies came up and we were happy to jump in and help. We refinanced 4 different times but still felt confident in our homes value. Two years ago was the last time we refinanced, our home was appraised at $402,000. This year……$102,000. Maybe we should have put more money away and back into the house instead of pay for my fathers funeral?? Or take in my niece and her 2 kids when her husband left her and she lost her house?
As a child my parents took in family members in need of help all the time. This economy makes it extremely difficult to come together and help each other.
Now the house is beginning to ‘crumble’ around us and needs work but where now does that money come from…”It” can’t help us anymore. I’ve lost my job and my husbands hours have been cut back, he’s in bad health and I’m havin ‘mini-strokes. I Love my house, but we are in our 50’s and to tired to fight. Ethical or not….You do what you have to do to survive. We are Walking Away.

23 Renee Bidigare October 9, 2009 at 8:54 pm

My house that I have lived in for 23 years was broken into. We have steel stores and deadbolt locks. (I lived in Detroit). Thieves broke the glass in my bedroom doorwall and stole most of my jewerly and trashed my bedroom. The police took almost two hours to arrive. I was terrified the thieves would come back and next time hurt or kill someone. We even have two dogs and they still broke in. My blood pressure was sky high and my family and doctors told me that a house is not that important, but my safety was. I finally decided to move. I always paid my mortgage on time and had really good credit. My house was on the market for almost two years prior to the breakin. I moved because the thieves stole my sense of security, not because I could not make my house payments. I also cannot sell my house, as houses in this area are selling for $6,000 to $25,000. I owe more than this. I have hired another real estate agent who is trying for a short sale, but now they are asking for all kinds of private information. Even ask if I had a will. I would love to just give back my keys to the mortgage company, but an attorney I consulted said I couldn’t. My house is in very good condition and if I could move it somewhere different, I would. But I can’t stay in this neighborhood any longer. I’m at my wits end. My house is vacant, winter is coming, I can’t afford to pay for two sets of utilities, etc. I consider myself a good person, I wasn’t greedy. I can’t sell my house and now I’m terrified of living there. After two years of trying to sell my house, I’m tired of dealing with realtors who tell me they can help me, then nothing. I don’t want to deal with anymore and still don’t know what to do. Give all my private information to the mortgage company and try for a short sale or just give them the keys.

24 AV October 10, 2009 at 4:21 pm

WE bought a home we could afford at the time in 2004. Due to the economy we have lost our advertisers forcing our income to plummet. Furthermore 4 homes on our street that sold for 700 to 800 thousand have foreclosed and the BANKS have resold those homes for a bargain price of $425K..the Banks have further depreciated our community. Why should we continue to pay our $650K mortgage and spin our wheels…forget it we are WALKING!

25 California October 13, 2009 at 7:49 pm

We bought a house 4 years ago in a relatively nice, quite neighborhood with great neighbors. Before the bubble burst many homeowners sold or rented out their homes and now we not only have to deal with the fact that our home is worth 50% of what we paid for it, but we recently had gang members and ex-convicts move in and are living around us. Heck, a shooting just took place at the elementary school a few blocks away from us this morning. We have great credit and have always paid our bills on-time but this is getting ridiculous…not to mention dangerous! We have always been responsible and didn’t “cash out” on home equity and buy all “the toys” everyone else was buying so I have no problem getting rid of a worthless mortgage in a gang-infested city!

26 EP October 19, 2009 at 8:49 pm

I have no sense of obligation to BofA anymore. Yes, I bought a home that was more than I could afford. Yes, I screwed up and got an interest only loan when I shouldn’t have. BUT, these frickin banks were screwing thousands of people over by even making this horrible loans available. Where was the due diligence and the common sense on their part. Yes, I made a bad decision, but so did they. We both should pay for it… me by taking a terrible hit on my future credit report and them by keeping this fricking overpriced home.

27 Dee November 3, 2009 at 4:34 pm

I’m a 60 year old woman who raised 4 kids by myself. I have always paid my mortgage on time every month. Over the years I used the equity in my house to put all my children through college but made sure I did not max out the equity availability. My last refinance was for an adjustable mortgage. The bank that held my mortgage went bankrupt and sold the mortgage to Chase. Chase contacted me with the good news about changing my mortgage into a fixed rate loan and decreasing my rate by up to 3%. However, when they appraised my home it turned out to be an upside down loan at $100,000 below the selling rate from 2008.

I’m trying to find out all the consequences of just walking away. The more I look and read the closer I’m getting to leaving the keys on the counter and moving on. Most likely I will move into an apartment and never buy a home again at this age. By walking away I will be able to get all my other “credit items” ie. car and credit card payments totally paid off in less than 2 years. I just cannot continue living pay check to paycheck to pay a mortgage ($2600 a month) just to have a roof over my head. I need to start putting money into my retirement funds since I’ve lost 75% of that as well.

The banks made this…we did not get here alone. It will take at least 10 years to get the value of the homes back on track, if by then. Talk about quality of life…there is none when every month it is a struggle to pay the bills and have food on the table.

28 RICE November 9, 2009 at 9:08 pm

HELLO. WHAT ABOUT NOT PAYING THE MORTAGE TIL FORECLOSURE REALLY HAPPENS AND THEN AT THAT TIME DECIDE IF ITS WORTH KEEPING OR NOT. MEAN WHILE SAVE THE MONEY. WHAT DO YOU THINK ABOUT THIS?

29 frank November 30, 2009 at 1:34 pm

I am walking, but not till I milk the bank for free rent..till they kick me out.
After all it’s just stuff…i will find another home to live in..like I always have.

The banks screwed us, and the government is screwing us for more taxes and stealth taxes (fees for just about everything u need just to live). It’s my way of sticking it to the white man. If we all can do this in one move….we will lose to big government and the Mafia banks of the world…then we can start all over again without a corrupted controlled monetary system. Money concentrates power…and that is were we are at under the gun by big bankers and bought politicians. Change is good when the people and their children’s children will be finally free from their enslavements.

Wake up…. sheep are only good for fleecing, and once we catch on to their games, then they can’t fleece us anymore…then we’re only good to them dead. Do not wait till that happens and you are not ready for what is coming…lock and load, that day will be here…change is coming but not without some pain…stick it to the man while you still can.

30 Jess December 19, 2009 at 3:40 am

Wow ,We put $100,000 down appraised at 265,000, now at 86,000. Crap we did buy with our hearts and not our heads, and a condo on the water, anyway we’re doing the math and at 52yrs old i believe we are going to walk. In less than 3 yrs still will be able to put down a good chunk money on a home. When u do the math at times it does make good business sense to walk, Why do u think the banks are calling it toxic assets, well tide has turned and stay in your toxic asset till u have to go.

Save enough cash to make the next move. They will not help out so do the math people and do the right business decision. The banks and lenders, and appraisers created this train wreck why should we suffer upside down? There are know breaks for folks upside down, and do u really think there going to black list everyone who foreclosed?

Regards,
Jess

31 United Homeowners of America December 24, 2009 at 11:36 am

I would like to present an effort of the United Homeowners of America. In essence, our main objective is the same as that of a labor union – to build a sufficient membership to influence the decisions. In case of a labor union those are the decisions of an employer, in our case those are the decisions of the financial institutions.

The parallels of this effort and the labor union are staggering… a single bricklayer on a construction of the Empire State Building does not have a “say”, however, a significant group of bricklayers organized together can slow down or even halt the construction project. In our case, a single mortgage payer is irrelevant to the financial institutions, however, if a group representing even a 10% of a bank’s portfolio approaches in unison with joint demands… it will be a different story. Their statistical models can predict individual consumer behavior, but the same statistical models “go out of the window” if we are talking about a joint effort. And it is for this exact purpose that the banks organize their mortgage portfolios to include people of different races, interests, social groups, separated geographically, and wrapped with anonymity… all of that to SPECIFICALLY MAKE IT AS DIFFICULT AS POSSIBLE TO ORGANIZE (in the financial terms this is called “diversification”). What makes things even more complex is that banks are intermediaries and do not own or control your mortgages – the mortgages are spread across tens of thousands of Mortgage Backed Securities (Trusts) each of which with its own set of “owners” (investors). [These are the investors that your bank would refer to when saying “sorry… we cannot do anything for you… those are the investors that are bad guys that refuse to modify your mortgage”]

Where does the United Homeowners of America fit in? We are identifying the Trusts, people/entities that run those Trusts and the investors in those Trusts. Then, when homeowners register, we will be matching them with the Trust that holds their mortgages, with the investors that own the Trust… and when we see that we have a substantial identifiable group of homeowners that can bond together and “arm twist”… we’ll do exactly that.

32 The Smarter Wallet December 24, 2009 at 12:46 pm

To all those reading the information you see on this page: I just want to remind everyone to do your due diligence when following up with resources and info that you see submitted here. If you have any specific interests in any group or organization that presents themselves here — please do your own research. This is just a reminder that I only provide a forum for discussions here but I do not regulate nor necessarily endorse the opinions and offers that others put forth through this channel.

I only hope that as you check our pages, you’ll find something helpful and useful from our site.

33 HAlexander January 31, 2010 at 10:34 am

I am seeking some insight but certainly will not rely on the answers but it will give me some thought. I purchased my townhome in 2006 at the height of the Atlanta real estate market, on a property that was talked “down” to $320,000. My mortgage is $285,000 and the appraisal for a refinance came in at $140,000!! Incredibly unbelievable if it wasn’t true.

This being said, my worry is a mortgage of over $2,000 a month and property taxes that continue to rise. Even if the market rebounds, albeit slowly, my property will not be increasing over 100% for sure. If I do walk away, are there ramifications other than credit and steps the bank would take such as wage garnishment to get the money back? That is my biggest concern.

Any insight would be great. Thank you.

34 AAAA February 21, 2010 at 5:19 pm

Generally speaking, you can’t walk away from an upside down mortgage in Florida without some type of aftermath such as a deficiency judgment. If you walk, you should expect either the bank’s attorneys or a third-party debt collector to harass you, and/or sue you for the difference. If you walk in other states, it may not be so bad. But I’m sure that if you walk from your home in the state of Florida, you will be in a lot of trouble unless you declare bankruptcy because they will try to sue you for the difference. If you have no money and your the head of the house, they can’t garnish your wages, but why bother living with a judgment for the next 20 years of your life. Sit down with a good real-estate attorney before you decide to walk cause you have to protect your assets or whatever little you have left. Just Google “deficiency judgment in Florida” and see of the mess many have had to deal with after they walked from a home.

35 Dee | Payoff Mortgage Early March 23, 2010 at 8:58 am

I wouldn’t walk away, I would try everything to keep my house. Because it would give you a bad rep, if you wanted to buy another house in the future.

36 Robo March 25, 2010 at 12:36 pm

I bought my house here in FL in 2005 for $205,000 with an 80/20 configuration with very little money down with decent fixed rates. I’m paying about $1525/mo for the two mortgages. After 5 years owe $187,000. If I sold today, I might be able to fetch $110,000-115,000. I have a good, seemingly stable, job and no trouble making the payments and maintain excellent credit. I have no reason to sell or refinance so losses are only on paper. Still pains me to see prices continue to drop. It’s equally painful to even consider just walking – so will likely stick it out. Remind yourself these are not hard losses unless I walk, sell, or refi. Base on history, real estate market, it always has. This is a long-term investment not a short-term business venture.

37 vicky May 15, 2010 at 7:43 pm

I’m glad i didn’t buy a house.

38 milore June 7, 2010 at 3:14 pm

I bought a home at 160,00. Two yrs ago it was valued at 185,00. Today, it’s valued at 85,000. I have a fixed rate, 5.125%. I’m staying. Why? Because it’s still my home. I didn’t buy as an investment, I bought so I’d have somewhere to live after being homeless. The housing market is cyclical but still…I love my gardens, the fact that I can do as I please in my home. And I feel a moral obligation. I did my homework before I bought and went to a reputable business. I didn’t buy more than I could afford and actually did the figures beforehand to see if I could afford the mortgage if I lost my full time job (as I did in 2008). My car is paid for. I have no credit cards. I live simply. I don’t have cable (not a TV watcher) or an expensive cell phone. I don’t smoke. So I am in better shape than a lot of people. I’m in my late 50s. If this world is still around in ten yrs it will be interesting to look back and see the ramifications of all our decisions. But for me, this is the right one.

39 Alicja July 18, 2010 at 11:02 am

In 2006, I bought a condo-conversion in southern California for $250,000. It is now worth $120,000. BofA will not refinance. I want to walk away unfortunately the mortgage is under my parents’ name/credit. I’m in my 30’s and feel like a huge shackle has been tied around my ankle. I didn’t realize how angry and depressed this so-called investment would make me feel. I don’t know what to do. I feel like I’ve smashed into a brick wall and with it my dreams have been shattered, too.

40 Andy October 24, 2010 at 4:58 pm

I’m a responsible buyer – I purchased my condo back in 2007 with 15% down in California. Back then it was worth $480,000, these days same condos in the same complex are selling for $290,000. Now, considering my 15% immediate loss and credit score going down the ditch, what would be the best solution in this situation? My current credit score is 790 and HOA is threatening with additional $20,000 in special assessments.

41 anita November 23, 2010 at 2:58 pm

Take the emotions and stupidity out of your decision. Sit down and do your numbers. Ask yourself how long you have to make up the loss in value and how much it will cost you. Do your homework and understand the consequences if you should walk. This nonsense that your credit is ruined forever is not true. you have to consider that it will be less than perfect for a while, but hat may be a good thing.
If after all of this, it makes financial sense, then do it, however, do not let these people trying to have moral high ground influence you. These are the same people who look at homeless and jobless people and call them lazy! they do not realize they could very easily be there too!
Also, please look at this as a business transaction. Most business will cut their losses when it makes sense, but only if it truly makes sense. They usually have a plan of action afterwards and so should you! Good luck to all!

42 BEN March 21, 2011 at 7:49 pm

HECK WITH ETHICS ,WE ALREADY KNOW WHAT THE BANKS’ ETHICS WERE — DUMP THAT HOUSE , I’M UPSIDE DOWN AND CAN’T EVEN MAKE REPAIRS. THE HOME IS FALLING APART BUT I CAN’T LOSS EVEN MORE MONEY. GOT TO JUNK IT.

43 Paul May 5, 2011 at 6:16 pm

To all,

Many of us have the same problem. I read in the wall street journal that 1 in 5 homes in America are now worth less than the amount owed. Underwater or not, home values continue to drop nationally eating away at perhaps years of equity building for everyone, including those that owe the banks little or nothing currently.

We as home owners need to join forces and quit paying our mortgages. More radically, we should quit doing business with the banks altogether. It is the old strength in numbers argument. Only then, will we the banks act to right the wrong they have done to each and every home owner.

Each and every home owner in the county should have at least a one time base adjustment to current market value and receive cash or a mortgage forgiveness adjustment. I think this will stop the continual property value declines. It will give people the wherewithal to sell homes that are otherwise no longer underwater and maybe even help the return of the housing market.

So how do we create a grass roots rising to join forces and put this plan into action.

44 Franklin Min May 31, 2011 at 6:03 am

In an upside down mortgage. Bought in 2006 at $143,500, now worth $71,000. I am 65 retired on fixed income. Current mort is 30 year fixed at 2.9%, bal of $123,000.00 monthly $730 including taxes and insurance.
I am figuring if I walk at this stage it will cost just as much to rent. Any advice appreciated. I live in Georgia.

45 A.E. June 3, 2011 at 10:16 pm

Even with triple-digit (about $200k so far) losses, We didn’t even CONSIDER walking away until recently, as the HOA has allowed our unfinished development (the builders all went bankrupt and simply packed up and moved on) to go into blight. We now have tons of unfinished lost, with holes in the brick wall fences, fire hazard shrubs/brush growing out of control…this was supposed tonbe the home for our children to grow up in, but now not 1 but 2 drug-dealers have moved into the neighborhood.
Ethical?? We were flat-out lied to! This is supposed to be a “Master-Planned Community, but it no longer has a plan of any kind. It is now the “Land that Time Forgot”. We are walking, as soon as we figure out how to do it!

46 A.E. June 3, 2011 at 10:17 pm

Sorry, that was supposed to be “unfinished LOTS” (houses that were never built).

47 hateMyLoan August 4, 2011 at 5:10 am

I am sorry. I have never missed a payment. I have never been late. I have paid enough in interest alone in 7 years to cover 60% of the home original value. But because my homes value has crashed, I am required to keep paying PMI. Basically I will be out of PMI 10 yrs into a 30 yrs mortgage. And I don’t get to deduct the value.

The bank is robbing us blind. If I walked away now they would $20K in PMI and $126K made in interest on a $200K loan.

The “hit” banks are taking is strictly not receiving the income on the books. But the interest income on most of the loans more than covers the actual value of the property.

It’s like saying I lost a renter. I still got all the rent income and I still own the property. And if the bank wasn’t such a greedy SOB; he/she would make it appealing for people to keep their loans in the worst economy in US history since the depression. Which we didn’t have because we but a floor on falling stocks and printed money.

48 Just saying August 18, 2011 at 11:18 pm

The banks do not want to help because they have for one thing made their money back just off the interest payments people have been paying. Secondly they wont work with you to lower the interest or payments, because they are greedy. They can and do sell the house out from under people for less than what you owe, and then cry to uncle sam about their loss, and Freddy and Fannie may pay them up the difference for their loss. so they stand to make more money in the short of it by not helping you to stay.And all of this after the feds bailed them out with all of our money not once but twice. And then Freddy and Fannie may keep going broke because of these pay outs, and the feds take more of our tax dollars and give it to Fannie and Freddy in the tune of 1.8 billion or so a shot. We as a people are so screwed by all of these greedy banks with their million dollar bonuses, and a runaway spending misguided government that only caters to the wealthy.

49 Becky August 16, 2012 at 7:58 am

Here’s my dilema, bought a house back in 03 for a very resonable price of 69,000 (bought it from an investor/flipper). I had recently got remarried and with one small child in tow. The home was somewhat a fixer upper. And it was tiny, 1000sq. After living there a year I had my 2nd child. The house suddenly got real small. And money quickly was being use for other things then repairs. We soon found out that our home is not built to code one bit. The house was falling down around us. Our siding was slapped to the 2×4’s without any weather barrier or anything, mold is now taking over the house. Kitchen counters are falling apart; electrical was rewired because of code violations… you name it, we have done it and so much more is needed. Not to mention, another baby. So that brings us to 5 in 1000sq. It’s so cramped and the walls are falling down around us. We have a 2nd loan and a 1st loan. We owe more that the house is worth. The neighborhood has been crime infested and we are in a bad school zone. What do we do. Do we stay? Do we drop $20,000 we don’t have to fix a house that we don’t want to be in or do we walk?

50 The Smarter Wallet August 18, 2012 at 10:54 am

Sounds bad Becky. At some point you should cut your losses. Every decision is about tradeoffs. But in this case, if you don’t see a future in the area, why drop $20,000 and invest hard earned money? If the area can improve and may see a turning point in the future, you need to assess whether you want to continue living there. Good luck.

51 brandy September 23, 2012 at 11:33 pm

WOW I Bought a house 5 years ago for 325k, now its worth under 200k. The payment was 2500 interest only, but we were promised if we never missed a payment for a year we could refinance because our credit would be better. We even ate at the dollar store to make the payments each month to refinance. OOOH but guess what sorry your house now a year later is worth less then what you owe so we can not refinance your mortgage…so what KEEP PAYING 2,500 A MONTH ALL TOWARDS INTEREST…rent it from the bank for twice as much as a normal renter..banks can go fuck themselves…..ruined my life!!!

Obama got us to go down to $2100 a month that goes towards principal but still wow i pay that much for something worth 200…not 325 ..oh and I had to not pay my mortgage for 4 months to qualify for help, because when we were current but broke and hurting we did not qualify for help…we had to risk and stress for 4 months, and then the 2500 per month was added to the back of mortgage so an extra 10 grand we now pay interest on……….i hate it!

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