Friday, December 19, 2008

Underwater News

While we may get snowed in today, but it is better than being underwater. Once a homeowner is underwater there are a new set of questions to ask "Should I stay or should I go?" As The Clash noted - "If I stay there will be trouble, and if I go there will be double." The song may not have been written about post-bubble issues, but it applies perfectly. Staying is trouble, walking away may be worse - or maybe the other way around depending on your financial situation.

This bring us to another article on the walking away phenomena that the housing bubble brought us. Along with NINJA loans and 100% financing we get walking away and jingle mail. This is explored in an article from the Associated Press titled Falling house prices spur jump in mortgage walking. Lets take a look -

Walking away from a mortgage has always been a homeowner's last resort — it flies in the face of the American dream. And experts say it should remain a worst-case scenario.

But with the deepening economic crisis fast adding to the 12 million mortgages already "underwater" — the term for when a home's debt exceeds its market value — it's an option more are likely to consider as home prices continue to fall.

Mortgage and financial experts hesitate to recommend a voluntary action that not only threatens to wreck your credit score for years but can result in authorities coming after other assets. But depending on state laws, they acknowledge it makes sense to at least look at it in certain situations.

"You have to make the best decision for yourself, business-wise, which could be walking away from the house," said Nicole Gelinas, a chartered financial analyst and senior fellow at the Manhattan Institute, a conservative think tank.

Mortgage walking surfaced as a phenomenon in the wake of plummeting housing prices.

The housing bubble is having many foreseen and unforeseen consequences. However, people will always do what is in their best interest. If it will take less time to repair your credit history than to pay down exorbitant debt then that will be the choice many will make. In state's with non-recourse loans and big property value declines this will probably become quite common as the unemployment rises.

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