I wrote earlier that we should not walk away from your house if you are upside down on your mortgage. I’ve changed my mind. If you lost your job or had a great reduction in income for whatever reason, the banks don’t seem to care. They’ll stall until you have used up your savings, made the very last payment you can and than foreclose on your home.

Here’s a portion of a great article on the subject of walking away from your home that appeared in the SF Chronicle:

“Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don’t feel guilty about it. Don’t think you’re doing something morally wrong.

That’s the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis.”

White argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they “have no reasonable prospect of recouping” in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume.

“Homeowners should be walking away in droves,” according to White. “But they aren’t. And it’s not because the financial costs of foreclosure outweigh the benefits.” Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, “one can have a good credit rating again – meaning above 660 – within two years after a foreclosure.”


“How does White’s 52-page manifesto go over with mortgage lenders? Predictably, not well. Officials at Fannie Mae and Freddie Mac – investors who fund the bulk of all new mortgages in the country – disputed White’s characterization of how quickly after foreclosure a walkaway borrower can obtain a new loan. It’s not three years, they said, it’s a minimum of five years, absent extenuating circumstances such as medical or employment problems that caused the foreclosure.”

Remember, before you walk away from your home, check with your accountant or a tax attorney.

This is a great article, read the rest at San Francisco Gate

So what do you think readers?