Home Owners That Just Walk Away

[Jun 6, 2008.]

 

It might seem unbelievable but as the housing market continues its downward spiral, more and more homeowners are choosing to just walk away.

This usually happens to those who were using the property as an investment and have found that the home equity is far less then the mortgage being paid. In an effort to save money, these owners are allowing the property to slip into foreclosure. Families are even starting to follow suit, choosing to pay credit cards and other debts before mortgages.

Families feel that walking away is a viable solution since many have bought the home with a mortgage that required little money down. These families just do not have enough invested in their home to make those monthly payments seem worth it. Instead they opt to pay credit cards and auto loans. This is because families would rather go into foreclosure then face bankruptcy.

Craig Watts who is a spokesman for Fair Isaac, the credit reporting firm that most of us are familiar with through the FICO credit rating believes that families are opting for foreclosure since "The time it takes to regain your credit score can be shorter than after bankruptcy."  Watts is correct and families know it.

Home owners who got into their home using a low adjustable rate mortgage have found those mortgages resetting at a higher interest while the equity in their home is just simply not enough to offset the change. This causes a higher mortgage payment without the option to refinance at a lower fixed rate mortgage. Families facing such a situation would rather walk away and search for a fresh start then attempt to salvage something that may very well lead into further financial ruin.

The numbers of home owners walking away is only expected to rise as home prices continue to fall. This epidemic is not limited to low income communities who first felt the crush of the sub prime mortgage collapse. In fact, all areas are seeing walk aways as an alterative.