Some Homeowners Stay in Homes, but Stop Paying on Mortgages

[Jun 3, 2010.]

 

Strategic defaults have become more common as many homeowners remain underwater on mortgage loans. But while many people who stop paying on mortgages abandon their homes and relocate to new residences, a growing number of folks appear to be staying put.

Mortgage Modification Strategy

The New York Times reports that some homeowners who stop paying on home mortgages are ending monthly payments to get caught up on other bills or boost their savings. The article characterizes this as a "homemade mortgage modification" for people who have not had success with getting help through the government's plan. The New York Times states:

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

Mortgage Lenders Are Slow to Evict

The article also says the average borrower who is in foreclosure is delinquent on their mortgage for 438 days before being evicted. In many cases mortgage lenders are simply too overwhelmed to deal with delinquent homeowners any sooner.

Mortgage Loan Modifications

While it is true that the government's mortgage loan modification plan has had lackluster results overall, it seems like there has got to better way to deal with financial difficulties than walking away from a loan if you can actually afford to pay it. There certainly are plenty of homeowners who legitimately have fallen on hard times due to a major illness, job loss, or some other situation and cannot afford to keep up with monthly payments on a mortgage. 

But there also are borrowers who have decided to stop making monthly payments on a mortgage and remain in their home because they are angry at mortgage lenders, upset about home values falling, or simply don't want to be burdened with making monthly payments. Others have tried unsuccessfully to get a modification or refinance deal and simply don't know what else to do.

Saving Your Home

If you are struggling with the idea of walking away from a mortgage, consider the following. Have you made a good-faith effort to talk with your mortgage company to discuss the situation? That doesn't mean you made one phone call and gave up, but that you called repeatedly to find the right individual to deal with the situation. Second, if your mortgage company indicated it might be able to help, did you provide all the necessary documentation requested?

Finally, do you really want to deal with the foreclosure process, poor credit, difficulty getting another mortgage, and other negative consequences resulting from strategically defaulting? Probably not, but ultimately you must make the decision to do what you feel is best for your circumstances.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.