Homeowners are walking away from their homes at all-time historic rates as foreclosures rise in the face of a deteriorating economy, according to a new Housing Predictor study. The fact emerged from a study of 15 metropolitan markets scattered throughout the U.S. as a result of increasing foreclosures.
Mortgage experts say the incentive to freely walk away from a home is highest in the ten states that have anti-deficiency statutes, prohibiting lenders from suing mortgage borrowers for the balance due on the mortgage after foreclosure.
The study also showed that a tide of resentment has grown among homeowners aimed at mortgage companies and bankers over widespread loose lending guidelines that have triggered the mortgage crisis. New creative mortgage products developed by lenders, including Alt A mortgages led to the foreclosure epidemic.
“There are some folks suggesting that state anti-deficiency laws should be expanded around the country as a response to the mortgage meltdown,” said North Carolina attorney Donald Lampe.
The nation’s foreclosure epidemic has topped 3.4-million homes and is forecast to worsen in 2009 as more than 3-million Option A adjustable rate mortgages reset during the year. An additional 2-million are scheduled to reset in 2010. The Obama Administration is planning on requesting help for many of those facing foreclosures as part of its rescue package.
But the new administration’s time table to aid those facing foreclosure is key to slowing the epidemic. Non-recourse states include hard hit California, Arizona and Florida. The others are Alaska, Connecticut, Idaho, North Carolina, Texas, Utah and Washington.
Walk-Aways have become a reality in the troubled real estate market as homeowners become unable to either pay the higher cost of their mortgage after it is adjusted to a higher rate or decide to walk away from their home due to falling home values. The majority of the U.S. is under going housing price deflation.
YouWalkAway.com is an online firm that counsels homeowners on what to do to walk away from their mortgage if they are unable to get a mortgage company or bank to modify their loan. Counselors offer advice on how homeowners can become empowered, including how to live in the house without making payments for more than a year before being foreclosed.
In Sacramento, California real estate broker Ruben Ramos has been criticized for encouraging troubled homeowners to walk away from their homes. Sacramento has been one of the hardest hit areas of California’s foreclosure epidemic.
“There are a number of cases where that is the only option available,” Ramos, broker-owner of Ruben Ramos Realty and a real estate instructor told the Sacramento Bee. On a panel of real estate professionals offering advice to homeowners, Ramos explained that he counsels mortgage borrowers to get all the months living in their home they can without paying a mortgage before being foreclosed.
“Pocket the money you’re saving,” he said. “Call me 25 months later. I’ll put you in a nice home.” Federally regulated mortgages now call for three years before new mortgages may be underwritten following a foreclosure. But many mortgage industry experts expect the national average to fall as the foreclosure epidemic worsens and more homeowners lose their homes in foreclosure.