Faced with negative equity, high mortgage payments and a bad resale market, many homeowners who are "underwater" are choosing to simply walk away from their mortgage obligations, Reuters reported March 17. Homeowner are considered underwater when they owe more on their mortgages than their homes are worth -- and according to the article, there are 8.3 million Americans in that situation. Tired of struggling to make payments that no longer seem worthwhile, these homeowners just stop. Then, they can live in the homes during the months-long foreclosure process, allowing them to save money until they need to find a rental home.
These semi-intentional foreclosures might be the best decision for the homeowner, the article said, but they can have a profoundly negative effect on everyone else. When banks don't get the payments they're expecting, it hurts their bottom line -- and if it's widespread, it hurts an economy that's already struggling. Meanwhile, foreclosed homes sit empty and uncared-for, driving down property values for everyone around them. This could actually accelerate the trend toward walking away, the article said, because lower property values put even more homeowners underwater, further incentivizing them to give up on making payments. Unless lenders or regulators are willing to refinance or modify underwater loans, this could create a vicious circle.
Unfortunately, this is not new to anyone who has followed the foreclosure crisis. Stopping mortgage payments is not an easy decision, but it's one that lots of Orange County homeowners have had to consider recently. As Santa Ana mortgage loan modification lawyers, we know that this might actually be the most sensible decision for underwater homeowners who have no realistic way to catch up on their payments -- but it's not a decision to be made lightly. In addition to the practical and emotional consequences of losing the home, homeowners who go into foreclosure have their credit ruined for seven years. This makes it very difficult to start over later.
In our Costa Mesa mortgage loan modification practice, we help our clients avoid facing this decision in the first place, by negotiating changes that make their mortgage payments reasonable again. Our Fountain Valley loan modification lawyers aggressively negotiate with banks to win changes to mortgages' structure, interest rates and, when possible, principal. If clients are considering a bankruptcy to save their homes, our Garden Grove bankruptcy attorneys can explain the likely results of that choice as well. If you're one of the thousands of Southern California homeowners who is underwater and at risk of default, Howard Law LLP can help. To set up a free, confidential consultation, please contact us online or call us toll-free at 1-800-872-5925 today.