To Default or Not to Default?

One of the leading proponents of strategic default—a.k.a. walking away, even when you have the money to keep up with mortgage payments—says there are three situations in which it’s actually a good idea to keep paying the mortgage.

University of Arizona law professor Brent White, whose new book is entitled Underwater Home: What Should You Do if You Owe More on Your Home than It’s Worth?, says that defaulting can be the smartest financial decision a homeowner can make, and that ethical concerns should not factor into the decision. In other words, this is strictly business.

Even though White says that walking away is often the most sensible option given today’s housing market, while speaking with the NY Times’ Bucks blog recently he laid out three scenarios in which strategically defaulting is probably a bad idea. The situations are:

1. You’re less than 10 percent underwater (you owe $100,000, for example, and your house is worth $95,000); or

2. Your monthly cost of owning is less, or only slightly more, than the cost of renting. In other words, the net cost of owning your home (your monthly mortgage payment plus all other ownership costs minus any tax breaks you get from owning) is less, or only slightly more, than the cost of renting your home or an equivalent home (Professor White details how to make such calculations in the book); and

3. You don’t need to move.

Note that “You made a promise to the mortgage lender and you’ll feel bad if you broke it” is not one of the situations.

MORE ON STRATEGIC DEFAULT:
The ‘Free Rent’ Approach: When Homeowners Just Stop Paying Their Mortgages
Strategic Mortgage Default: The Irresponsible, Amoral, But Best Strategy?

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worleyeoe

Right! And, of course, the mortgage companies did nothing wrong by pushing interest only loans, no-income-doc loans, etc. And, they’ll tell you it’s “just business” when they foreclose on your home you can’t afford. In most markets, homes that are 20-40% underwater may not see black again.

The economy is in shambles, with limited chances for meaningful job growth. Our national deficit is growing by trillions of dollars a year. At $1.5 trillion for this year, how can we overcome this? Really, such a deficit is unimaginable in terms of solving. Simply put, we’re screwed by we just don’t want to believe it quite yet.
http://realfakeid.wordpress.com realfakeid

Of couse, with the Obama admininistration’s great idea to demolish housing where prices are falling and supply is greater than demand… after you default and ruin your credit, your house will be demolished. Then you and all the other taxpayers will be get a tax hike to pay for the bank holding the dafaulted mortgage. It seems the only winners here are the banks and the government. As usualy, the average American taxpayer gets screwed. When will this foolishness stop? When will government stop screwing things up by trying to control prices?