Homeowners And Foreclosures

Posted on September 8th, 2008 by saman

A burgeoning number of home owners are starting to fall behind on their house payments. Bankers and mortgage holders worry that many will not be able to pay their mortgages. While this is true in some cases, some individuals will simply not pay their mortgages.

With the current mortgage crisis, millions and millions of owners of homes now owe more on their houses than they are really worth. However, at this point, there is not a lot of evidence that those who can make their house payments are walking away from their property as the home values fall.

Throughout the Internet, there are a lot of stories about homeowners what are mailing their house keys back to the bank and walking away because they don’t want to keep home that is consistently losing its value. “Jingle Mail”, a term used for these house keys in envelopes is actually much rarer than you would think.

Freddie Mac estimates that only .14 percent of mortgages that went into default that they have in their portfolios were abandoned. There is another mortgage that has this number in single digits. These two companies deal with conservative loans so the actual numbers may be a bit higher. Some officials in the mortgage industry say that they just do not know for sure.

Even though the facts say otherwise, the idea that some people are being defiant and simply deciding not to pay their mortgage has intrigued a lot of people. When ball player Jose Canseco lost his mansion to foreclosure and moved to a smaller home, some saw this as a walk away but this was not true. In truth his is the only one in his area that did this. Stories, like the story of Jose Canseco get people’s attention, but these are just isolated occurrences.

There are some economists that say that the numbers shown by Freddie Mac and Fannie Mae are consistent with housing busts. Such housing busts occurred in the 1980s in the state of Texas and in the 1990s in the state of California and in the northeast. Owners of homes usually do not simply walk away from their houses unless they simply can’t make their house payments because of situations such as job loss, death, divorce, or a huge jump in the monthly house payments.

Though home owners usually do not walk away from their houses a real estate investor will walk away from a property if the prices drop. Research has shown that the rich are no more or less likely to walk away from their homes than someone who is poor. Someone’s credit history is a much better indicator of how they will act if they are faced with a foreclosure. The amount of the down payment a person put on a house also determines how they react if faced with a foreclosure.

The government has said that those who can pay their mortgage but choose instead to walk away from the home are not entitled to any foreclosure help. Even so, sine home price are dropping so rapidly, homeowners who do have the ability to make their house payments may be tempted to simply leave their home.