Underwater Mortgage? Suze Orman Recommends Walking Away From Your Mortgage

suze orman

As home prices continue to plummet and unemployment remains a huge problem, more and more homeowners are turning in the keys to their homes and refusing to make any more payments on their mortgages. However, walking away from an underwater mortgage, known as strategic default, has long been a subject of controversy and often viewed as highly irresponsible– until now.

In the wake of a collapsed housing market and sluggish economic recovery, a few noted finance authorities, including Suze Orman, have actually come out and recommended the practice of strategic default.

So, how can a supposed finance expert condone walking away from a financial obligation and purposely ruining your credit and reputation as a borrower? According to Orman, it comes down to a simple calculation.

Suze Orman Advice: Guide on Walking Away From a Mortgage

According to Orman, you should stick it out and continue to pay off your mortgage if your home is 10-20 percent underwater. However, if the balance on your mortgage is 20 percent greater than the value of your home or more, it isn’t worth paying off.

Step one should be to ask your lender to modify the loan and reduce the principal owed.

If they refuse, which they likely will, your next course of action is to ask for a short sale. If they don’t agree to that, try a deed-in-lieu of foreclosure.

Still get a “No?” Orman says this is when you should be walking away from your mortgage at this point, and you shouldn’t feel bad about it since you asked your lender for help and they refused.

Suze Orman Advice: Walking Away From Your Underwater Mortgage on The View

The Repercussions of Walking Away From Your Mortgage

A strategic default, and subsequent foreclosure, leaves a nasty mark on your credit profile. Consequences include:

  • Drop in Credit Score: Foreclosure results in a penalty of approximately 85-160 points, according to Fair Issac, which means even a borrower with good credit can easily slip into the sub-prime category.
  • 7-Year Listing: Foreclosure stays on your credit report for seven years, which means your score will remain damaged for this period of time.
  • Cash Is King: Securing a loan of any sort will be very difficult. Your existing credit cards should go unaffected as long as you stay current on the balance, but overall, you will have to save up and pay cash for everything.

The repercussions of turning in the keys are severe and long-lasting, yet many strategic defaulters would rather live with those consequences than keep making payments on an underwater mortgage.

Should You Keep Making Mortgage Payments?

There are a number of convincing arguments for and against strategic default, though you may consider some weightier than others.

Why Walking Away From Your Mortgage Could Make Sense

Advocates of strategic default say it is really about making the best possible business decision. Why continue to pay thousands of dollars toward an investment that is no longer worth it, when you can rent a home for much less and save the difference?

While a foreclosure will stay on your credit for seven years, making it virtually impossible to get a decent loan or line of credit, you can use that time to save up and start over.

By renting a house for less, you can apply the new income toward other outstanding debt instead. You can even put a little cash aside for a down payment and apply for a mortgage again later. Seven years from now, you will have built your credit back up and saved for a home that has (hopefully) rebounded in value and become a viable investment once again.

Professor Brent T. White of the University of Arizona advises the financial benefits of walking away from a severely underwater mortgage far outweigh the short-term affect on credit. As explained on Credit.com, the only thing holding homeowners back is “their moral qualms about refusing to pay their bills…this moral barrier was constructed by a variety of players, including the government, the financial industry, and social control agents like banks and media.”

Why You Should Continue Making Mortgage Payments

Aside from the devastating effect on credit, walking away from your home loan poses a number of serious concerns.

The major issue behind strategic default is that you ignore your ethical obligation to uphold the terms of your loan. Our credit system relies on the trust between lenders and borrowers, and if people applied the same logic to other types of loans as they do when it comes to underwater mortgages, no one would ever feel obligated to pay back any of the money they owe.

In fact, allowing your home to be foreclosed helps drive down your neighbors’ home values as well, contributing to the problem and lengthening the recovery of your local housing market.

If you’re not experiencing a significant financial hardship like unemployment or a medical emergency, it’s hard to justify walking away from a mortgage simply because it’s underwater.

Alexandra Swan, Vice President of Frontier 2000 Mortgage & Loan, writes for her blog,

“appreciation or depreciation on the house is just a number that changes arbitrarily.  When properties were appreciating at a skyrocketing pace, no homeowner ever went back to their mortgage company and said, ‘I know I bought this house for $200,000 and I financed $150,000 but now it is worth $500,000.00 so I think I owe you some additional money.’  So why, in the reverse situation, should the bank lower your principal simply because the value has dropped?”

As Swan points out, you wouldn’t quit paying your auto loan, even though you know it will only depreciate in value as soon as you drive it off the lot.

Secondly, consider all of the money that you’re essentially throwing away. You’ve made expensive mortgage payments for years, and by walking away from your home, you’re also walking away from your investment.

After all, an overvalued home is probably better than being in the hole a couple hundred thousand dollars with nothing to show for it. The housing market will recover some day–so who cares if your home’s value doesn’t catch up to the mortgage until 20 years into your 30-year fixed loan?

Finally, there will soon be severe tax penalties for defaulting. Walking away from your mortgage loan doesn’t mean you get a slap on the wrist and then go on your merry way. At the end of 2012, a federal tax break for short sales and foreclosures is set to expire, which means you’ll be required to pay income taxes on the remaining loan balance.

If you get lucky, you can use strategic default to your advantage, walking away from a poor investment now and saving for a better one years down the road. Many homeowners have done it, and many more probably will.

However, even the “experts” get it wrong sometimes (Orman is not a licensed investment advisor, by the way). It’s probably not a good idea to walk away from your home simply because it is undervalued–in this case, you’ll likely trade one unpleasant financial situation for another that’s even worse.

Photo credit: Freedom To Marry

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  • DG

    The credit hit isn’t as big as the banks would like you to believe. I did a DIL and 4 months after completion my FICO is 720. I know others whose scores have recovered quicly also.

  • Henry

    but does it make sense to keep mortgage payments when the loan is interest-only and when house price is under 60%?

  • John

    I know someone who walked away from her house, cashed in her 401(k) and bought another one for cash. Now, 3-4 years later, the banks are going after her, taking her to court to get their money back. Her 7 years of bad credit hasn’t even started yet. She has bad credit, but won’t start to recover until after the courts are done with her case. It might be years yet.

  • Wendy

    I find it shocking that so many people find it completely acceptable to walk away from debt. When you sign your name on the dotted line you are making a promise, it is your responsibility to repay regardless of the underlying value of the asset. How would you feel if someone promised to pay you back and then said, Nevermind I shouldn’t have to, and I have no moral or legal reason to do so. Just because you don’t owe a “person” your debts doesn’t make it any less despicable to walk away. There are stockholders in those banks that don’t deserve to be stolen from

  • Insider

    As someone who spent 20 years in the mortgage industry I can tell you that Americans finding themselves underwater in their homes should consult an attorney to fully understand the potential repercussions to strategic default, such as deficiency judgment.

    That being said you have to understand that the banks and their fraudulent underwriting and securities ratings CAUSED the bubble. Qualified borrowers were put up against a slew of subprimers in home bidding wars. The banks enabled unqualified buyers to distort the market through excess and false demand.

    The banks created this problem and Americans should shoulder no trepidation about sending the fraudulently induced loans back where they came from. In fact, I submit that this is the only patriotic thing to do as it will shell those “too big to fails” with such gaping holes in their balance sheets that the people can actually veto this “too big to fail” nonsense on a street level.

    Oh and by the way, when Paulson brought those congressional leaders into his office in August of 2008 and said $800 billion or martial law on Monday, he should have been arrested on the spot: a) for attempting a coup and b) because Hank Paulson started the whole subprime fiasco when he was at Goldman and nobody looked at him and said, “Hey, aren’t you the guy who started all of this?”

  • Not Sleeping

    “Secondly, consider all of the money that you’re essentially throwing away. You’ve made expensive mortgage payments for years, and by walking away from your home, you’re also walking away from your investment.

    After all, an overvalued home is probably better than being in the hole a couple hundred thousand dollars with nothing to show for it. The housing market will recover some day–so who cares if your home’s value doesn’t catch up to the mortgage until 20 years into your 30-year fixed loan?”

    This is about the dumbest thing I’ve ever read. The WHOLE POINT of a strategic default is that it makes the most financial sense for some underwater situations. You can debate ethics, but this half-baked financial argument is ludicrous. Of course you are walking away from your investment. That’s the point. The question is from this day forward what course of action will maximize your returns? For many, especially in non-recourse states like California, the answer is to walk away. And in terms of your ethical obligation: just remember that if you consciously decide to continue paying a mortgage which is now the equivalent of a highly inflated rent payment, you are choosing to give that money to a bank rather than building a nest egg for your children. I don’t see the ethics in that.

  • scott

    I don’t think default is what it used to be when it was a legitimate dereliction of an obligation. Today, a default is the last course of action when you find that you’ve been robbed of about 30% of your last ten years income because your dream home’s value was misrepresented by banks, appraisers, rating agencies and our own government.

    Today, most defaults are simply calling the banks and their appraisers B.S. Remember, many of us were approached by our banks and induced to borrow against value that was fabricated by the appraisers in a deliberate calculated fraud.

    Appraisers just need one ‘comp’ that had the ‘appropriate’ value and the rest was history.

    Then decent and hard working folks borrowed against false equity and improved many of these properties, new roof, paint, windows – all while paying interest that was 5-6 times what the banks were paying the fed for the exact same money. And, the banks are insured against their losses, at times making a profit from your default.

    The bank employees go home at night and sleep in homes that are paid by your blood, sweat and tears. They don’t seem to be aware of the moral quandary that we are experiencing as a result of their ‘pump and dump’ scheme.

    Now, the banks own the properties and we are on the hook for billions of defaulted dollars. They get insurance, we get court rooms. They get bonuses, we get unemployment. They get caviar, we get rock soup.

    Their children are in private schools in Manhattan, ours are scrapping it out for their lunch money in public schoolyards that are decrepit because everyone in the food chain with the exception of the 1-2 percent at the top are in shock, unable to make sound decisions, living in scarcity…Just the way they had it all planned when they started building the house of cards.

    It seems like the Occupy Worldwide folks are on the brink of civil revolution. I say….YES! In the mean time…ask yourself…Why keep paying on an investment that has no value?

  • Hb

    I don’t think there is really an ethical argument here at all, it should be a purely financial decision, the same as it was for the banks that gave out these high risk loans…they took a risk they could profit by giving loans to people who couldn’t afford them, and they lost the bet in the long run. The bank is making a decision on mitigating their losses by not modifying loans. They certainly have that right, but the risk is default. I presume if they won’t modify the loan, they think they can do better if the loan defaults than to reduce the loan. So, the question to ask yourself is whether or not you are headed for financial ruin if you keep paying. If it just means tightening your belt for a few more years, but you can make ends meet, then it’s worth keeping the house, your investment into it, and your credit rating and avoiding the legal battle that will follow. If you really can’t afford it and are going into deeper and deeper debt to the point that it’s really a matter of walking away now or foreclosure later, and you need to dramatically downsize to keep afloat, including already selling off anything you can…extra cars, TVs, etc…and you better be reading this from a free public library computer, or else it’s time to cancel some frivolous services like cable and sell the computer before saddling others with your bad financial management…then it’s really not going to hurt more now than later to get out from under that house.

    If you were one of the fools who got into bidding wars to pay higher than asking price for a house, you are part of the problem and I don’t feel sorry for you at all now that your bad math skills have come back to haunt you. Rentals are going up, so take in a boarder/roommate before opting to default. It might crimp your style of living, but you can’t afford your style of living anyway.

  • Sue Harding

    We moved from Texas to AZ at the height of the bubble and had to enter a lottery to even be considered for a home purchase. In that week, before our number was pulled, home prices shot up $10 to 15K. Instead of purchasing a dream home, we had to step way down in our expectations and desires and purchase a small, nothing fancy home. Eventually, we lost one of our jobs and the value in our home fell by $100K but we cut our spending and made sacrifices that allowed us to pay off the full over inflated mortgage of our home. I am annoyed at people who didn’t think ahead and curb their desires in their original purchase. Their now defaulting is continuing to pull our home value down. Walking should be a last resort and yes, only after a moral struggle. It wasn’t the banks fault as much as it was the federal governments…they are the one that during the Carter/Clinton administrations ordered that home loan standards be relaxed to allow those to buy homes who really didn’t qualify or have the means to take the up and down of home ownership! SEE = Bill Clinton’s drive to increase homeownership went way too far Posted by: Peter Coy on February 27, 2008

    They promoted paper-thin downpayments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place. (http://www.businessweek.com/the_thread/hotproperty/archives/2008/02/clintons_drive.html

  • sybase37

    The Banks walked away from there Gambling with folks money and got a taxpayer bailout unlike the underwater folks did. I just quit paying on my Condo and never been happier. I moved to a non-recourse defiency state where they can’t put a judgment or garnish my wages.

  • sybase37

    I did a strategic default in SC and 8 months later to my suprise when I bought a new car, I had a 735 credit score. I have paid off numerous credit cards and have virtually no debt now and don’t need credit.

  • Marko

    I have 2 words for you: “deficiency judgment”

    If you think it is smart to walk away from a home or try the so called “strategic default”, you have not done your homework. The banks weren’t pursuing it before because they were too busy, but now they are catching up.

    There is a long statute of limitations on defaults, and they can be renewed indefinately, meaning you never know when the suit will show up, good luck trying to sleep with that over your head.

    1st Whammy: After you are evicted, thieves and kids will trash your empty home and steal all the valuables, decreasing the value of your home.

    2nd Whammy: The bank will auction your home for whatever it will bring, usually MUCH less than what it was worth when you stopped paying, especially after the vandalism.

    3rd Whammy: deficiency judgment, you will be sued for the difference between what the bank gets at auction and what you still owe, PLUS court costs, other legal fees, and lawyer fees.

    Suze Orman just lost a few fans who used to think she gave good advice.

  • Brian

    What Marko says is correct.

    The banks are now aggressively suing people for the loss between the mortgage balance due and the foreclosure sale price. If you walk away from a house you paid $350k for, and still owe $300k, but the house is foreclosed and resold for $150k, the bank will come after you for the $150k they lost. And they WILL win a judgement against you. The statute of limitations on this debt is very long. So you may very well end up wrecking your credit history, wrecking it further by having a judgement against you on the record, AND still have to pay back the losses incurred by the bank as well as legal fees. Just crazy.

  • Not One Size Fits All

    Marko and others – deficiency judgment only applies in recourse states. In nonrecourse states (California and Oregon, as well as a handful of others), the terms of the contract are quite simple. If you don’t pay, the bank can have the property back, but can’t go after you for more. That’s the law, and it’s the contract the bank entered into as well, after all.

    So cut the scare tactics, OK, or at least note that they don’t apply everywhere.

    Same thing for the “Eviction” and “vandalism” fears. If you stay in your home while defaulting, you’ll get plenty of notice before an eviction, starting with the Notice of Default, which kicks off a statutory process with MINIMUM times itself. You’ll have plenty of time to pack up your things and move, with no “thieves and kids” going after your belongings. That’s just silly.

    In California, landlords and even some people selling homes FSBO are very well-informed about what’s happened with real estate here. It’s quite common for landlords to ask for one deposit amount with good credit, or another amount (2x/rent, for example) for people with lousy credit. But since people are often able to stay in their homes for a year or more while stragically defaulting before even receiving the first notice of default, they typically have money saved.

    I have friends who saved payments for 14 months. The house was in one of their names, not both. The other was able to take that money and a bit more they’d saved and put 20% down on a new house, correctly priced for the market. BofA has their old house now. California. Perfectly legal.

  • Here’s the deal. Interest rates are either going to be fixed of flexible within a set range. Tanking the economy so homes are worth less but keeping payments scheduled at old prices raises current interest rates astronomically without wording it as such. The principal and interest owed simply becomes an adjusted higher interest rate. No it’s not that simple, but it should be because being off the Gold Standard and being on the Real Estate Standard SHOULD mean that when the value of land goes down then so does the value of the dollar, both values will fall (and be equal) at the same time so homes shouldn’t be able to lose their value one penny. e.g. $100,000 worth of land (Acres a+b+c) today are still $100,000 worth of land if the value of the dollar (based now on real estate) goes down since the value of money and land are now tied to one another.

  • Those coming from a strict economic background education aren’t going to agree with my previous statement because of the scope of economic theory provided by their educational institutions. Therefore to better understand my point of how the dollar linked to gold remains constant and thus so should the dollar linked to real estate remain constant I’m providing a link to a simple to understand YouTube video. http://youtu.be/35zfqnBfACQ

  • Not one fits all… is absolutely correct. Verify if your property is in recourse or non-recourse state. Just do your homework and you’ll be just fine.

  • beachgal

    I’m very concerned regarding a deficiency (i’m in FL). But i lost my job and can’t pay for my mortgage. 66% underwater. It used to be that when you lost your job you could sell your house to pay the note. I’m stuck in this nightmare thru no fault of my own and I’m going to end up paying for the bank’s mess. Where are the class action suits? I shouldnt have to be in this position.
    By the way, Wendy above said that we should keep paying because we sign the papers. those same papers say if we don’t, they can take our property. So that’s the option we are handing over.

  • I just wrote a review on book, The Money Class on my website: http://www.budgetwisefinancial.com.

    My take away is that is not a hard fast rule. What Suze is presenting is the option and giving people the parameters to consider. Each person has to do their own homework and make their own decision based on their own reality. There is no one size fits all anymore. Underwater mortgages are a part of today’s reality.

    She did a better job explaining it in the book, than on The View. To her defense, they were throwing so many questions at her like and acting like what she said was Law.

  • CharlieBrown

    Hey businesses and state goverments walk away from their obligations too. In my state, workers have been furloughed 3 years in a row, and the state government has “Service Reduction Days” where government offices don’t open on a regular business day. What’s the difference?

  • Dana Lee

    In my situation, when I purchased my home, I was in sound financial shape. Of course the economy crashing affected my business and on top of that my husband got sick and can no longer work, so our income has dropped significantly. We are not irresponsible to our obligation but are victims of circumstance. Be careful of being critical of those who may just need to walk away. Sometimes not fullfilling ones obligation has nothing to do with ethics. And I agree that there comes a point where you really need to decide if the home is worth dying over in regards to having to work so much and so hard to keep it that quality of life is no longer present.

  • When people purchased their homes, they were appraised at a value that justified the amount of the loan. The housing market collapsed. People made bad deals. While there was fraud in some instances by lenders and/or appraisers, the great majority of loans were legitimate. People need to take responsibility for their obligations. The lender is not obligated to refinance a loan that would be for more than 100% of the home’s value. There is a moral hazard at work. If lenders refinance bad loan deals, how should those consumers who made better deals and paid off their loans feel? Like chumps. This simply is not fair to the responsible borrowers, and that is why the refinancing of “underwater” borrowers’ loans should not be required.

    If people don’t want to or can’t pay their loans, they should accept the consequences. Bankruptcy is intended to offer people a fresh start, although you probably won;t be able to get a loan (at least a mortgage loan), for 7 years.

  • I have created a new Facebook page for anyone who is about to Walk Away or considering it. I have posted this article as reference material on the page. Please join REAL HOMEOWNERS (not lawyers, not real estate agents, people who gain NOTHING from this experience) in the Rise and Fight against these mortgage companies:


  • Paul

    Suze, is right on target this time! The purchase of a home is a business traction and as such must be treated as one. The contract says if you fall into “default” (fail to pay as agreed) on the loan the bank will take actions which could include foreclosure. Because this clause is in every mortgage document there is no reason on earth to inject morality in to this business decision.
    Being in default means you are still in “contract” it’s your legal right to default on a loan for “any” reason”.

    Example: you and your neighbor owe the same amount on identical homes. You both work together an have the same incomes and deductions. Your neighbor chooses to default and you don’t. Possible outcome, after two years of not paying (yes some people haven’t paid in 3 years) the bank does renegotiate with him. They lower his balance,and give him a better rate. You continue to pay as usual. Your neighbor took that $1500 payment ($36,000 over 2 years)and paid off all his bills. You are still deep in debt! Is that morally right that the bank lowers his note and rate because he refuses to pay and you still are paying? You think it’s not happening??? Think again. How smart are you???? It’s strictly business as Trump would say.

  • Paul

    People buy homes everyday with zero credit. A good credit score is only important if you want a loan from a bank at a reasonable rate 4-5%. People will lend you money at 6 and above. I foyu aren’t interested in buying a home or car who cares what your score is currently???

    A friend just went BK-7 after they received the discharge they’ve received many offers to lend them money to buy a new car and credit card offers to build their credit back.
    What’s that all about? It’s about knowing they can’t file again for 8 years. The banks want YOU in debt!!!! It’s our choice.

  • You rightly say that a cae is not an investmant but yhen neither id a house.

  • Considering Suze Orman’s humble beginnings I am surprised at her comments. She says she got out of debt the old fashoned way. She sacrificed and got her self out of debt. So when something is not going your way you just walk away. No wonder this country has no backbone. No drive. I believe the days of bailouts for everyone are soon to be over. I will move to the next channel whenever I see Suze Orman sharing her great wisdom.

  • spartacus

    Simply put, a contract is a “promise to pay.” However, there is a clause in a residential real estate contract that generally stipulates;(my interpretation as a non-lawyer) “in the event that you cannot pay as promised, the bank can receive liquidated damage for breach of contract,failing to pay your mortgage loan as specified for in the contract.” The liquidated damage is possession of your house. Moral obligation does not come into play here. You pay off the mortgage the house belongs to you. You don’t pay off the mortgage as promised, the house belongs to the bank. What happens if you walk? For tax implications seek a tax attorney and/or CPA. For possible legal implications for defaulting on a loan in a non-recourse or recourse state seek advice from a real estate attorney.

  • Margaret

    If you are going to cover these issues or comment on them, please do so completely, from all perspectives.
    What hasn’t been mentioned in the article or the comments is the fact that in many cases — certainly here in Oregon — the foreclosing entities, usually a bank or servicer, can’t provide proof in the form of a deed or note, let alone the two together as is legally required, that they are the entity to whom you should be paying your mortgage. The banks used the Mortgage Electronic Recording Service (MERS) to record transactions in the securitization of our mortgages and failed to record those transactions at the County Recorders offices across the US. Interesting issues thus arise: the homeowner who has two banks foreclosing at once (Florida), at least one of which s/he’s never heard of; homeowners who have paid off their mortgage but can’t get a clean title (every state in the US); homeowners who have paid off their mortgage but find themselves facing foreclosure (Florida, Arizona)! The issue surrounding clean and clear title will be with us into the next generation of ‘homeowners’. We need to be digging very deeply into the securitization of home mortgages and what it means for the future of all mortgage holders. I haven’t yet heard a good reason why we should pay, as mortgage holders or taxpayers, for the privilege of allowing the banks to destroy our individual and public wealth.

  • Ranger Dan

    Considering that the reason my home has dropped so precipitously in value is because of poor and unethical decisions made by the very banks themselves, I would feel absolutely zero remorse for dumping my home square in their lap. I am all for being ethical, but I will not play the fool with too much pride. It is simply a business decision, and given the same set of circumstances, but in the other direction, the bank would do the same to me in a New York minute. Profit is King, everything else is poof!

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  • allan

    Why would you have to pay income tax on the defaulted balance?

    • exaag

      If the debt is waived or forgiven it is deemed “income”.

  • John

    The term “moral hazard” comes to mind. Certainly, an commitment to pay has to be honored by any ethical person. The reason often given for the banks or the government not altering that commitment is the “moral hazard” that will accrue to the system by absolving individuals of their responsibilities. But almost no one talks about the “moral hazard” of allowing the banks and other large financial entities to largely escape their share of responsibility for the current situation–as we have. It is “business as usual” since the government insisted on no change in business practices (yes, including an indefinite moratorium on bonus payments and reductions in out of proportion pay packages) in exchange for the public’s largesse. What about that “moral hazard”? Is it any wonder then that the ordinary loanholder looks at this situation and says, “I will behave likewise if I can get away with it”? The problem, as I see it, is hypocrisy. Now that the banks have been bailed out they (and their share and bondholders) should be forced to accept their fair share of responsibility for eliminating the bubble they had an instrumental part in creating by reducing mortgage principle to a legislated difference between the paper value of the mortgages and the current actual value of the underwater properties based on a Congressionally ordered OMB audit calculating the share of “blame” that–morally and ethically–should be shouldered by each party. Perfect? No. But it would address the “moral hazard” issues we already have and prevent any further ones that may arise.

  • Wayne Thompson

    For all of you who are blaming YOUR greed on the banks, appraisers, and other lenders consider this. If you sold your house and decided to carry the mortgage for your buyers, would it be alright if they walked away with your money? I think we all know the answer.

    Time you took responsibility for your own actions instead of pointing the finger at anyone else. Have some integrity

    • jack

      Did you make sure the value was hyper inflated and then double their payments.

  • Davle Bee

    Yes, but the mortgage is written by the Bank’s lawyer in the Interest of the Bank, not in your interest. Besides the Bank is rich and powerful and most Bank made good profits, even in recession year. We, however are weak and vulnerable and are dependent on only our jobs to pay our mortgage. In addition, the Bank hires Economist with PHD, or even teams of Economist with PhDs, so they can predict housing bubbles and economic recessions better than we, with only a job to pay our mortgage. In the housimng bubble and recession, the bank must suffer any consequences, NOT the mortgage holder.

  • Jim

    I bought a townhouse in 2006 for $225K. Due to all the foreclosures and short sells in my community, my home is now worth ~$60K – but I still owe $215K. I have not missed a payment on ANYTHING in 10 years, and ALWAYS pay more than the minimum but the banks have recently started cancelling my $0 balance credit cards and telling me I don’t know how to manage my money, that I’m a bad risk.

    I’m thinking that if I’m going to get screwed anyway, why not walk? Paying your bills, keeping your promises is not enough anymore and the concessions all seem to be for those who don’t play by the rules.

  • Suzie

    I received a 40% decrease in my salary because my workload has severely dropped and I don’t anticipate it picking up anytime soon. I am taking a short course of schooling to change my career but, in the end, will make the same amount of money. But with a better posssibility of advancing. I have some money invested and am using the interest on that to help pay my bills, along with my current income. I still can’t cover my mortgage payment. Would it be fair for me to still walk away from my mortgage payment even if I have invested money?

  • I can understand your frustration because there are alot of people out there trying to work with these banks but they will NOT deal. However, for the people with underwater mortgages that are successful with dealing with the bank. They will still owe MORE than the house is worth.

    AS for the post further up on seller finance. The only problem with that is the payments are still financing a larger mortgage balance (once again paying on a house that is upside down)

    There is a program that can help you and the others. The company is Freedom USA Investing and they help people with underwater mortgages.

    They contact the bank and buy the mortgage at a discount. Once they purchase the mortgage note at a discount they have you refi from them a little higher than the purchase price. The day you refi from them you will have equity in the property.

    The website is “refinanceunderwatermortgagehelp” {dot} com.

    It might help the others. It’s worth a try.

  • Hey there! Question, You Suzie were talking about at the end of this year 2012, as far as shortsales/forclousures. we will be responsible for paying taxes on the remaining amount. Is this based on when we put house up for shortsale, when we start the forclosing procedure or is it based on AFTER either of these things are completed? We are going thru mediation and possibly a shortsale/forclusre, but we want to avoid having to pay taxes on the remaining balance. You can send response to my e-mail pls. Thanks

  • Angelita, there is no email in your message. If you are reading, there may be taxes, and it is very much worthwhile to pay for a little time with an experienced tax adviser.

    In California, a new law guarantees you cannot be taxed for loan forgiveness in short-sale.

    Federal Law guarantees you are not responsible for taxes (at least through Dec 2012). You all should contact your Senators and Congress person to ask them to extend this.

  • If people don’t want to or can’t pay their loans, they should accept the consequences. Bankruptcy is intended to offer people a fresh start, although you probably won’t be able to get a loan, for 7 years.

  • baby doll

    The problem started when we lost our jobs. Our employers DID NOT promise or guarantee that we would always keep our jobs until the day of official retirement. Instead, many people were laid off with early retirement or fired with no money to pay for their homes and other expenses. Unemployment and no jobs caused a lot of this mess. If we had jobs, we could pay for the mortgages, the expensive cars, etc. If we had good jobs with high pay that kept up with the cost of living, a lot of this mess would not exist. But no, now you see elderly people struggling to find work because they were laid off at age 54 instead of of retiring at age 65. Our good manufacturing jobs for the middle class are gone overseas because it is “cheaper”. Now, our young people are saddled with debt from exorbitant student loans and all I want to know is, where is our bailout??? Workers in India and other countries get pennies for a day’s work and the rich corporations and businesses make millions bleeding us dry with their high interest, penalties and greed. The prisons are overflowing with young people due to drugs, crime and depression and no chance for a good future in this so called great country and something is very wrong here. We are getting the shaft big time.

  • Susan

    I am trying to short sale investment property in Texas. They will possibly do a short sale but want me to pay the difference from the short sale and the deficiency which would be over 110,000. We own our primary residence in Michigan and I am worried that they will place a lien on our home. Can’t seem to get out of this mess. I am using a person trained in short sales, but because Texas protects their people with their Homestead and cars, Michigan does not. Exhausted and tired of the whole thing. Lenders are very difficult to deal with and my realtor has 3 offers and they won’t let him submit them because of having trouble with their system.

  • Angelica

    My estranged husband. (Who lives in CA) would like me to cosign on a refinancing application on his condo. I am not a part owner as I signed off on that 15 yrs ago but this would put me back as one. The mortage co wants my drivers license (Florida) and tax info on my condo (in Florida) that is owned outright and shares in ownership with another person…..my question is, what would my responsability be if he defaults, or dies….would I be responsible for the mortage payments and could my condo be in jeaordy?,

  • aged2

    I bet this sounds stupid. We are both 65+. Have a two family empty now than received foreclosure notice. Its been a year no foreclosure yet. The house needs lots of work, we no longer can do ourselves. Never mind tenants do not pay. The bank sent us a notice we need to pay insurance and taxes. We haven’t received a formal letter stating you pay taxes and insurance we will not foreclose. The mortgage co is beneficial. should we rent a house before walking or foreclose first. We live in ma. rents are high. So sick of trying to figure out what to do.



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  • exaag

    Susan does not mention deficiency judgments, so be careful. I had a 15 yr mortgage with Regions at 7.5%. The 245k mortgage was paid down to 155k when I lost my job and also suffered a severe health crisis. Regions refused to refinance, Regions refused to accept interest-only payments while I listed the house, and Regions rejected a short sale for 115k. Meanwhile Regions kept tacking on late fees and interest, running the balance up to 200k. Regions demands a deficiency judgment in the amount of 70k. Regions actually demanded that I pay them rather than continue insulin. If Regions waives the deficiency I will owe the IRS taxes on the “forgiven debt”. Furthermore, after losing this home I relocated to another state without realizing that my new state does not offer “Homestead protection”. Be careful. Oh yes, and do not expect “equity” from any judge in Lee County, Florida.

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    • Mokhtary

      We are looking for £208k finance only for 5 years to pay our existing mortgage which has been interest only and then we pay off with the found that we have out of the uk.This will give us time that some international condition changes and we be able to transfer the money via the banking system.

  • Patricia D’emanuele

    First of all …. Please define the word ” Expert” because one has gone to class or a Seminar does not Qualify one as an ” Expert” or does it ? Almost every homeowner which received a loan modification is NOW back in default .There are several more million homeowners with distress over loan modification , in my professional opinion simply speaking the majority are set up to fail …. These are trial base periods .The governmental.agencies are ” giving up” every exuse in the book is used especially with Fannie Mae. FM is actually demanding BPO agents they hire on many occasions to use properties they find . No comparison to the subject property whatsoever . Agents are driving by assessing valuatiom of the property … How are we letting this happen ? Go inside see the condition… No your repair and replacement cost because Fannie what was two years ago is not what the present is. Properties are rising with abandonment, swatted , vandalized ,still flooded in our area needing elevation and here we go again the BPO is sent Fannie Mae you can not value a property needing elevation unless it is appraised and inspected by replacement experts for cost .. So please instead of paying for six or seven “BPO” drive by that don’t go in with warning enter at your own risk signs . Get it right the first time ., Shooting five pictures with 120 worded lines is by far impossible … At least your keeping the independent appraiser s employed Homeowners find someone who doesnt give up as agents must know the exact date down to the minute for yoir valuation disputes or you will lose. Show up in court present your clients case . The Governments globally created this process yet …the government can not keep up with their own process hence ; you must.. This is a vicious circle for homeowners .Nationally we had almost a 4% spike almost three years … Look at the falling numbers in your market … It’s creeping up and unless you take action now it’s only going to get worse … Modified Homeowners are not saving for the “Rainy Days ” Our great nation is in the wake of another economic disaster. The harsh reality is the creeping crash is here and it is here to stay . Who put us back in this situation ? The same institiutions who ” attempted ” to get you out. Wake up America . Did any one wonder why they will allow you to short sell; only never get a loan modification on the price the government would accept someone else to purchase . A little backwards Fannie . There are many alternauve solutions our mortgage reps know , agents and brokers know further more and foremost the government know . Write to your legislation fix America and our Homeowners . Our government should create less hardship not devestate the already hardshipped …Loan Mods awarded with Sherif sales with days of the modification …. True Situation five years all parties passing the buck on re recording . Judges adjuticating propery back …and the servicers are told … And for claim to know nothing yet sit back call from India or another country stating they hire an EXPERT. Only the EXPERT is 40 to 100 miles away . This time they hired an appraisser when the home was destroyed and sat with sewer water for five years all elements destroyed Squatted vandalized copper gone then setforth the Demand 90k for a property apprived to sell for 75 k in 2012 in habiable condition . I tell you this to let it be known do not wait until you are down to the minute …. Have a vacant distressed property what are you waiting for. Agents like me want to help your distress . Now Back to the EXPERT …. Until one has processed the transaction hands on experience s … Not one the same because the standard practice are almost a pick n choose scenario there are no EXPERTS the term is used to freely . FIGHT for your RIGHT …..keep your dollars tight America …. Or where ever you may be . Real Estate and the stock market contol our economy ….wise up wake up. Jim below this view … Don’t look at this like your getting screwed … Turn that energy around …. New Beginning my friend . think Positive .

    • Patricia D’emanuele

      Come back into this discussion .. I’m curious to see after 3 years where is Jim today. .. Tell me … What happened

  • Nancy Baer

    I have essentially lost everything. I quit-claimed my property to my NOW ex-fiance and he has since left me for another woman. He has started a partition in the court to sell the property that I once owned with NO mortgage, and I can’t stop it I am told. We are both on the mortgage and the deed. I have been paying the mortgage, property taxes, and property insurance by myself since he walked out in 2008. I have tried to get a mortgage loan to refinance but am told only HIS name has been sent to the three credit agencies for reporting..it is like I haven’t been paying the mortgage, etc; The mortgage company knows this but still refuses to WORK WITH ME!? It is a 2005 single-wide mobile home on its own land. Please..if you are reading this..please do NOT sign ANYTHING without a good lawyer and 100% knowledge of exactly what it is that you are doing. He has gotten everything now..my home..my vehicle..my life. Please don’t make the same mistake!

  • Gary Childers

    Nearly ALL of my friend’s income is going to her mortgage, but the so-called mortgage relief lenders she has approached all tell her that her annual income is too high to qualify for any mortgage relief strategy. Consequently, she’s always BROKE, DESPITE her unusually “high” income! What can she do?