---

Stay Or Walk Away From Your Home?

---

Nov 24^th, 2009

 

For many homeowners, there are many who have never been late on their mortgage payments. With the tough unemployment picture deteriorating in the United States and with so many home values slashed and underwater with loss of equity, it is commonplace for many homeowners to find themselves strapped for the first time.

 

Homeowner Brian Gindlesperger has never been late on a mortgage payment and always believed that paying off his mortgage was the right thing to do. However, as he witnessed his home value falling off the cliff, he is wondering if paying off his mortgage makes anymore logical sense.

 

Mr. Gindlesperger, a police officer together with his real estate wife, Kelly had purchased their 4 bedroom home in an upscale neighborhood of Phoenix in 2005 for $650,000. They forked out 20% down payment knowing that they got a bargain and got a 30-year fixed rate loan for the remaining balance. Anticipating increasing costs for their daughter’s college, home improvements including a wedding, they took out a 2^nd mortgage against their home. Currently, they owe about $647,000 on the combined 1^st and 2^nd mortgage.

 

Average home prices in Phoenix have fallen 48% after peaking in the summer of 2006 as indicated by the First American CoreLogic Index. As a result, Mr. Gindlesperger estimates his home to be worth between $375,000 and $425,000 although it has a 4 car garage, a 1.2 acre lot that includes a swimming pool. Zillow.com, a web resource that estimates national home values based on the number of sales within its neighborhoods, estimated the house to be worth $374,000.

 

The Gindlespergers are one of many millions of American homeowners who are underwater on their mortgage or owe more than their homes are actually worth. They are all faced with the common question. Should they keep making payments and hope things will get better or give-up and walk away with the consequences of a 7 year foreclosure scar on their credit records.

 

Fortunately, the Gindlepergers have not had anyone try to force them out of their home as they were able to dip into their savings in order to sustain their mortgage payments. Similar with the rest who are underwater, there is not enough equity in their home to provide them a cushion in case of an illness or a sudden fate of income loss such as unemployment. In addition, they are not able to sell their home for enough money that will satisfy their lender due to the significant loss in home value. This makes them very vulnerable to foreclosure.

 

The only thing that could save them is a miraculous property rebound in home prices boosting the equity of their home. However, this is very unlikely to happen in the near term.

 

Some of their neighbors gave up and walked away from their homes. It is especially attractive for the Gindlepergers to follow suit as they could easily rent another home for a lot less than their combined monthly mortgage, property taxes, insurance and maintenance costs.

 

Mr. Gindlepergers says that he can’t rely on the quick housing recovery. He mentioned that he had to set his limit. If the family savings fell below a certain number, they would have to consider all options including a short-sale transaction.

A short-sale is when the home is sold for less than the mortgage amount owed and the remaining debt forgiven by the lender. Mr. Gindlepergers claim that they’ve always been responsible homeowners and are furious as they are draining their assets in order to sustain their mortgage payments or from falling behind. He said that at some point, you will have to know your limit and know when to quit before losing it all.

 

 

Comments

News Archive

Fannie Mae Launches New Program Converting Delinquent Homeowners Into Renters - November 11th 2009

Homeowner Gets To Keep Home After Lender Failed To Prove Ownership - October 27th 2009

Implications Of A Loan Modification - October 15th 2009

41 Suspects Arrested For Mortgage Fraud - October 15th 2009

Bridge Loans Coming Soon For Unemployed Homeowners - October 14th 2009

Government Modification Program Inadequate And Calls For An Upgrade - October 9th 2009

Freddie Mac Offers Door To Door Help On Your Modification - September 29th 2009

Federal Housing Administration (FHA) Running Out Of Money - September 18th 2009

Good Time To Refinance With Government Program - September 15th 2009

Selling Your Home And Tips For The First Time Homebuyer - September 14th 2009

How To Keep Your Home If You Lose Your Job - August 28th 2009

Citigroup Performing Well In Foreclosure Prevention - August 25th 2009

Foreclosure Rescue Scams Preying On Homeowners - August 17th 2009

Deutsche Bank Estimates 48% of U.S Homeowners Underwater By 2011 - August 11th 2009

Loan Modification Progress Report Card - August 5th 2009

How Bad Are Foreclosures In Your City? - July 30th 2009

Rep. Barney Frank Threatens Banks To Stop Foreclosure Or Else? - July 28th 2009

U.S Government Wants 500,000 Trial Modifications By Nov 1st - July 28th 2009

Subprime Brokers Involved In Loan Modification Scam - July 21st 2009

'Walk-Away' Survey Shows 26% of Defaults Are Intentional - July 21st 2009

'Own-To-Rent' The New Emerging Mortgage Plan - July 17th 2009

Tools To Help Homeowners Save Big In Property Taxes - July 16th 2009

Lawmakers Dissapointed With Foreclosure Help Programs - July 16th 2009

New Jersey Attorney General Goes After Mortgage Scams - July 15th 2009

Watch Out For Some Misleading Reverse Mortgage Advertisements - July 6th 2009

Chase And Bank of America To Experience 2nd Wave of Foreclosures - July 6th 2009

Obama Extends Mortgage Refinancing Program, Raising New Limit To 125% - July 1st 2009

Paper Avalanche, Lack of Trained Staff Add Obstacles To Loan Modification Program - June 29th 2009

Government Loan Modification And Refinance Program Shows Substantial Progress - June 18th 2009

Luring First Time Homebuyers, Tips To Beat The Competition And Sell Your Home - June 15th 2009

Bank Of America has modified 50,000 loans in Countrywide settlement - May 26th 2009