It’s an empty threat. Nationwide, it’s now NON-recourse debt for anybody who walks that bought OR refinanced their principal residence without taking cash out….
The Mortgage Forgiveness Debt Relief Act of 2007 applies to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.
The punishment would be insisting that they HAVE TO buy again within 12 months !!
5 years is a decent amount of time to repair their credit, save up for a down payment, and then end up buying the house next door for 50% less than they owe on theirs today.
The sooner they come to their senses and walk away, the sooner the 5 year clock starts ticking. Many people should be encouraged by this offer, and not be surprised if it is changed from 5 years to 2 or 3 years in 2010-2011…
The “system” may desperately need those people to soak up some excess inventory around that time.
