In Foreclosure? Walk Away & Save Money
Ugly posted this interesting LA Times article his Del.icio.us link role a few days ago. It seems that people with upside down mortgages (where your mortgage is greater than the value of your house) are voluntarily letting their properties be foreclosed on.
A homeowner who can’t sell his house tells the L.A.Times, “Foreclose me. … I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.”
Banks and lenders fear this kind of thinking – that walking away from a house could be the smart economic move – appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: “… people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties…”
It sure makes business sense to me why homeowners are doing this, cut your losses and get out but is it the right thing to do? I don’t know if its right or wrong but I do know that the Banks need to start being more accommodative to all borrowers now. Lending has gotten so tight that our mortgage company wants to charge us $5,000 just to refinance our investment property, and we have great credit!
With all this voluntary foreclosure activity, is it time to be a foreclosure vulture capitalist? Not yet, wait till the banks are choking on supply.
Right now we’re dealing with the Covid19 pandemic and a loss of jobs that we haven’t seen since the Great Depression. I call this a Depression like event, because it doesn’t ‘feel’ like anything I’ve ever felt before, market wise. Mass evictions and foreclosures are looming side by side a hot Real Estaate market. If you’re not on the lower rungs of the economy, it’ll be a shopping spree!
These are strange times indeed.