Why Defaulting On Your Mortgage May Be Best

housing market

In an academic paper titled, “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” written by Brent White, a law school professor at the University of Arizona argues that those who are underwater in their loans should just leave.

By leaving, it could potentially save them thousands and it won’t be long until they recuperate themselves. Defaulting “strategically” can pull more walkaways by buying all the major items they may need in the near future such as a car or even a house right before you take a hike. As long as you stay current with other mortgage lenders, one could potentially have a good credit standing in 2 years.

Also, many believe that signing a contract with your mortgage is for life, but contrary to popular belief, mortgage lenders have either no legal rights or limited rights to pursue walkaways.

The idea is that when people think about their financial situations, they let their emotions get in the way. They may think of the shame and embarrassment following the foreclosure but ignore what’s really going to benefit them in the end.  White addresses the social control agents that banks, government and media use on consumers saying that voluntarily defaulting on a mortgage is immoral.

Not very many people agree with his advice. Officials at Fannie Mae correct his statement that it takes a minimum of five years not just two because those who walk away from their obligations with their mortgage face serious consequences such as worsened credit scores as well as back the moral control that they also destabilize their neighborhood and community.

White’s article is promoting irresponsibly misinformed advice to potentially break legally binding agreements and send the mortgage rates even higher than now and completely tarnish the idea behind mortgage lending rests – the understanding to pay back the money they borrowed.

In my 7-27-09 post titled: San Diego Homes – WHEN IT PAYS TO LET THEM FORECLOSE! I noted that: In the Northwestern University study, among those without moral reservations, 63% of those homeowners with a negative equity of $300,000 or more would let the property go into foreclosure.

In my 9-22-09 post titled: Foreclosures – Strategic Defaults Double I noted that: Strategic defaults … financially it’s a logical, legal, defensive decision to make. Why throw good money after bad? No more property maintenance, taxes, insurance, etc. With rent prices falling and rental vacancies rising, it makes perfect sense to bail out and have more disposable income at the end of the month. Survival is the name of the game.

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