Should I Walk Away? – These are difficult issues and we know is a tough situation for you. You may be struggling or on the verge in your frustration of just walking away.
What should I do? We believe the wisest thing to do is NOT to walk away. We also know you may be at a breaking point with no feelings of hope.
Be encouraged. There is always hope! You just can’t see a way out when you are in the midst of your hardship and trials.
Here’s the downside to walking away. The principle is the same anywhere.
Sure – Walk Away From Your Loan, Why Not?
I wish I could write a happy post about the Christmas spirit right now, but I’m not in a generous mood. I just read an article which a professor of law advocates that people who are having trouble with their mortgages just walk away – free as a bird – and to heck with the bank.
Of course, we’ve all met people who are doing just that. One friend of ours walked away from her house and mortgage, skipping payments until the bank took the place back. She did so not only because the house had dropped in value, but because “it’s just too hard to sell a house in this market.” Not only irresponsible, but lazy.
“But if I give the house back, aren’t we even?”
Some people really do believe that. Of course, when property values have dropped, the answer is no.
I know the BP community recognizes this, but I’m going to explain it anyway so you can repeat this to any clueless people you meet.
When Shana Richey bought her home for $430,000 with no down payment, the bank wrote a check for that amount, more or less, to the developer or previous owner. (I don’t know the exact amounts.) They did this in the reasonable expectation they would be paid back with interest. That’s what banks do, lend money to people they think will pay them back with interest.
Assume that Richey paid down the principal by about $20,000 between 2004 and 2009. She eventually sold the place for $195,000 and told the bank “that’s it.” And the bank accepted this deal. Remember, they have no choice but to accept it, since this is California.
$430,000 – ($20,000 + $195,000) = $215,000. That’s the amount the bank lost. That money is gone. >Since this is happening around the country, and since the government doesn’t want Wells Fargo to go under, the bank now has $25 billion in additional capitalization from Washington. And where’s that money coming from? Us, through our taxes. Or our kids, through the deficits which will eventually have to be paid.
I don’t know if Richey understands this. It’s quite clear that even if she understood it, she wouldn’t care. But just maybe, thirty years from now, when her kids have to pay crippling taxes or all of our national assets have been sold to Chinese and Indian interests, she’ll care then. Of course it’ll be too late.
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