Mortgage law experts say the incentive to walk away from a home loan is highest in states that have anti-deficiency statutes, which prohibit lenders from suing borrowers for additional funds after foreclosure.One thing to note - there are three super bubble states on the non-recourse list - Arizona, California and Florida.
"These anti-deficiency laws make a huge impact on foreclosure rates because they are basically 'get out of jail free' cards," said Todd Zywicki, a law professor at George Mason University and senior scholar with the Mercatus Center think tank who's writing a book on consumer bankruptcy and consumer credit.
This handful of non-recourse mortgage states includes the high-foreclosure states of California and Arizona, which not coincidentally also are leaders in the numbers of mortgage walkaways.
The full list: Alaska, Arizona, California, Connecticut, Florida, Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah and Washington.
Friday, December 19, 2008
Walking Away in NJ? Not as Likely
There are states that have non-recourse loans which makes it very easy to walk away from the property. New Jersey is not one. Therefore we will probably never experience the walking away phenomena the way some states are. The Washington Post has an article titled Walkaways high in 'non-recourse' states that explores the whys and the whats of walking away. Lets take a look -