National real estate columnist Kenneth Harney wrote about the decision to default on affordable mortgage payments when the loan is larger than the value of the home. Is default a viable strategy?
What grabbed me was not the ethical question, but the factoid that homes purchased in 2006 in Salinas are on average $214,000 underwater! Those houses need to appreciate almost a quarter of million dollars before the homeowner has a dollar of equity. How long do you think that level of price growth would take?
My role as a bankruptcy attorney is often to ask the uncomfortable question. Why do you want to continue paying on a loan that is hopelessly more than the value of the property? What economic principle says that financially smart to continue to overpay? What are the prospect for mobility for the family who cannot sell their house for as much as they owe?
So, the issue of modifying mortgages has a far wider application than the bank supporters suggested. It’s not just people who “bought too much house”, it’s the people who lived next door to the people who bought too much house. The housing crash affects a wide swath of new homebuyers.
It’s easy for the older generation to sit in judgment.
[...] saw another facet of the underwater home mortgage when my client was considering whether to cure the mortgage arrears or walk away. If he cannot [...]