Nearly half of home owners recently polled in an online survey said they would walk away from their mortgage if home prices continued to fall. The poll included 1,000 visitors to HousingPredictor, a real estate Web site. While the poll is unscientific, some housing experts have questioned whether home owners are starting to grow more acceptance of the strategic default idea.
Strategic default is when home owners walk away from their mortgage obligations, despite being able to make their payments. In a similar poll in March 2010, HousingPredictor found that 32 percent said they would strategic default if prices fell further — compared to 47 percent in the most recent poll. A national poll in 2009 found that one in 10 home owners would default on a home if their mortgage was significantly underwater, according to a survey by Reecon Advisors.
But for home owners who walk away from their mortgage obligations, they often do so with later regrets. Experts caution that home owners take a big hit to their credit score — a 30-day late payment alone could bring your credit score down by 100 points, says Glamis Haro, a lending manager who was interviewed by AOL Real Estate. Defaulters may also have to wait up to seven years to even apply for a mortgage again. Plus, in “deficiency” judgment states, banks can later sue home owners for the amount they owe on the loan.
Strategic default remains a very controversial topic – fueled even more by the criminal acts of major lenders. The latest “foreclosure settlement” ruling did little to quell the anger of many owners…only difference is that the lenders and folks in charge largely skated, owners that walk away don’t get off that easy. The NYTimes ran a fascinating article detailing how a financial pro lost his home - and the diametrically opposed comments posted show the debate between looking at this as a business decision or as a moral obligation. As this economic slump continues and lenders have little to no motivation to try and work out manageable payment plans (Note that I’m NOT saying to forgive debt) we’re seeing more underwater owners look at this more from the business side…
The full article on this topic can be seen on AOL Real Estate.