Should I Walk Away from My House?

Strategic default has become a popular among homeowners who can afford their mortgage payments, but decide to walk away from their mortgages because their home values have declined.  They have made this decision because they have lost all their equity with no immediate hope of recouping their money.  Up until recently, they only consequences these homeowners faced were ruining their credit and the possibility of their lender coming after them for a deficiency judgment. Fannie Mae will be going after these borrowers in states that allow deficiency judgments as well.   Fannie Mae is encouraging borrowers who are in default to work with their lender or loan servicer to find a solution to save their homes from foreclosure.

Homeowners are Frustrated with Lenders

Many homeowners have tried to negotiate a solution with their lender such as a mortgage modification or short sale, only to find uncooperative lenders and a long waiting time.  Lenders are understaffed.  Paperwork gets lost. There are mistakes. Modifications are not working because borrowers default six months later.  Short sales were taking too long, and buyers are walking away from deals and sellers are having to start the short sale process all over again.  Everyone is frustrated. 

Government Streamline Programs

The government has stepped in to help streamline the modification and short sale process with the HAMP and HAFA programs.  However, the government programs are voluntary and only apply to owner occupied primary residences of 1-4 units.  Government programs are starting to help these homeowners, and lenders are becoming more cooperative and approving modifications, forbearances, short sales and deeds in lieu of foreclosure.  Even investors and second home property owners are finding their lenders more receptive to finding a solution for them as well.  More people are able to save their property from foreclosure now if they are willing to seek help.

Contagion Among Upside Down Homeowners

There are still a large group of homeowners that have simply made the decision to walk away because they feel that there is no point in keeping a property that they are upside down on even if they can afford their mortgage payment.  They see their neighbors doing it so they decide they might as well do it too.  It has a created a contagious effect on homeowners in areas such as Arizona, California, Florida and Nevada where property values have plummeted as much as 50% in the last three years.  If you fall into this category, you may want to rethink your position now that Fannie Mae and Freddie Mac are enforcing their strategic default policies. 

Speak to an Attorney

If you are thinking about strategic default, you should think twice and consult a real estate foreclosure defense attorney.  The attorney can advise you of all your options.  The attorney can explain the foreclosure laws in your state, and answer your questions.