[quote=GH]I am certain given the resources to pay a mortgage nearly 100% would do so even if the property was underwater temporarily.
I believe most folks that would actually walk away do not have the sustainable income to continue making payments (stated income loans?).
I would personally like to see many of these people prosecuted for lying on their loan docs (Amway biz making $200K etc), but the press presents them as losers, and I can see in a world where we were all told by loser Realtors we need to get in now or be priced out forever, and how the price would go up and we could “just refinance” and take the profit and send the kids to college.. There were few advocates questioning this behavior and questioning why these false and misleading sales pitches were advocated by various realtor associations…
Then we have the Fed… and …[/quote]
I have two friends who’ve both gone through short sales. In both cases they were seriously underwater on the house – and felt it would never recover. In both cases they had “skin in the game” – 1 had a 10% down on a 600k home, one had a 20% down on a 450k townhouse. That downpayment was gone.
In both cases they had FULL DOC loans. But layoffs happened. So your point about sustainable income is valid. They HAD the income when they purchased, but lost jobs. In both cases they could just squeak by on one income – but it was super tight AND they saw no chance of recouping their lost down payments. They would have had to give up things that were important to them – child enrichment, private schools, etc. Renting was more affordable than paying their mortgage… and since income was down – it made sense. I had long talks about this with one of the friends. In their case it was a strategic move. If they’d been unable to short-sell they would have let it foreclose. For them it was a choice to reduce housing costs (by going back to renting) to keep their kid in a top rated private school. Not necessarily the choice I would have made – but it wasn’t my home or kids.
Not everyone who walks or does a short-sale had a liar loan with no down payment.
I’m not suggesting it’s the best choice to walk away – but if the parties doing the walking recognize the consequences (lose the house, lose the downpayment, take the serious credit hit, etc.) then I’m not going to tell them not to do it.
