An unfortunate new trend has developed across the US – that of “strategic defaults” – homeowners walking away from their mortgage obligations.
60 Minutes did a story on this disturbing trend on Sunday.
Though I understand the thought and concern about the low prices in areas, but I don’t understand how people doing this don’t see the effect this trend will have on the entire US economic recovery if it gets more popular.
“Strategic Default” happens when a homeowner who can and is able to continue making payments on their mortgage makes the decision to stop and abandon their house because it is not worth what it was when they bought it. These homeowners are NOT distressed — have not lost their jobs and can afford their payments. They have decided that because their house is not worth what they are making payments for that they will just walk away and deal with the credit issues that foreclosure will cause for them.
Some banks and investors have walked away from places. They should not have done so either.
Though the people interviewed for the story feel that it is a “smart business decision”, I see this as a huge problem if the trend gets more popular. One stated that they “have been fulfilling their obligation to the bank.” This is simply not true if they choose to default on their loan. They are not fulfilling their obligation. The other one stopped making payments a month ago and is “living for free” until being foreclosed on in July. Then they will take their savings and rent a house while he rebuilds his credit. He does not feel any remorse over this decision and if it creates a bigger problem in the US, then “that’s for the professionals to figure out.”
I certainly hope that this does not become more of a trend in the US. If you are underwater in your mortgage and need help, please contact a professional. I can help you find one anywhere in the United States.
Contact me for Baltimore real estate help.