Sunday, November 22, 2009

Law Professor Says "Homeowners Should Be Walking Away In Droves" From Underwater Mortgages

A law professor is mystified by people who continue paying on "underwater mortgages," where the value of the home is less than what is owed.  And who is most likely to walk away?  20-Somethings.

 Brent T. White is an associate professor of law at the University of Arizona (a state decimated by foreclosures and plummeting property values).  He's written a paper titled "Underwater and Not Walking Away:  Shame, Fear, and the Social Management of the Housing Crisis." 

White's idea and paper have been in the press earlier this year, but it got attention again in the past week with the most current mortgage delinquency numbers:  14.4% of all residential mortgages are delinquent were or in the foreclosure process during Q309, according to the Mortgage Bankers Association.

From WSJ:

“Homeowners should be walking away in droves,” Brent T. White, an associate professor of law at the University of Arizona, wrote in a discussion paper. “The real mystery is not—as media coverage has suggested—why large numbers of homeowners are walking away, but why, given the percentage of underwater mortgages, more homeowners are not.”

White's paper is here.
The post from the WSJ Developments blog is here.
A NYT article about three 20-somethings with little $ who bought a $1M property with an FHA loan, here.  (Not that they'll walk away....)

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