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CBS News Financial Expert Discusses Pros and Cons of 'Walking Away'

February 18, 2010

As San Bernardino County loan modification attorneys, we have been reluctant to write about media coverage of the trend toward homeowners "walking away" from their mortgages. We find that despite the wealth of coverage of this emotionally charged issue, the vast majority of our clients have personal and financial reasons to look for other solutions first. However, a Feb. 16 article from CBS News provides a good overview of the pros and cons of this decision. CBS MoneyWatch.com editor at large Jill Schlesinger said the decision may be right for some people, but it's not one to make lightly.

Walking away from a mortgage means moving out and stopping payments because it makes more financial sense to leave than to stay -- not because you can't afford the mortgage. These "strategic defaults" are done because the borrowers are deep underwater and the numbers show that their finances will recover sooner this way. Not surprisingly, Schlesinger warned readers that any default, including a strategic default, will destroy their credit for seven years. She advised borrowers to weigh this against the prospect of being locked into a mortgage payment two to three times the price of rent. You may want to consider a strategic default if you're more than 20% underwater, she said, but you should always do the math. Interestingly, Schlesinger added that most borrowers are reluctant to consider walking away until they see the numbers convincing them that it's a better long-term financial move.

Our Pomona loan modification lawyers know firsthand that borrowers don't make this decision casually. We have represented candidates for a loan modification from the beginning of the housing crisis. In most cases, our clients have strong emotional reasons for wanting to hold on to their homes, along with practical reasons like wanting to keep the down payment or keep their children in good schools. However, when the math shows that a default or a personal bankruptcy makes more sense than fighting for the home, we don't hesitate to explain that to our clients. As Schlesinger points out, large real estate developers have walked away from soured investments for the exact same reasons, without creating the outcry aimed at individual homeowners making what is ultimately a business decision.

If you're considering a loan modification, bankruptcy or any other major financial move to deal with a bad mortgage, Howard Law PC can help. We represent homeowners negotiating with their lenders and loan servicers for a loan modification. Our Murrieta loan modification attorneys have been able to help even those who have been strung along for months by lenders that don't seem interested in providing a clear answer, because they know we can and will protect our clients' legal rights. In fact, we can and will file a lawsuit if we find evidence of predatory lending or gross negligence leading to an unfair and preventable foreclosure. We can also help clients calculate the benefit of other moves, including a short sale, deed in lieu and individual bankruptcy.

Howard Law offers free, confidential consultations, so there's no risk in speaking to us about your case and your rights. To set up a free consultation, please send us a message through our site or call us toll-free at 1-800-872-5925.