Owners walk from homes, values erode

Greta Guest, Detroit Free Press

With more than 500,000 households in Michigan owing more on their mortgages than the homes are worth, thousands of Michigan residents are choosing to abandon their homes and walk away, even if they can afford to continue making payments.

The number of people who have engaged in such strategic defaults more than tripled between 2005 and 2008 — from 5,100 to 17,250, according to a report by Experian-Oliver Wyman, a credit reporting and consulting firm.

Mark Zandi, chief economist for Moody’s Economy.com, said he expects the problem to get worse this year and next. “As people struggle to make ends meet, they will say this just doesn’t make sense” about continuing to make payments, he said.

The trend is being fueled by the large number of underwater mortgages — those where the bank is owed more than what a sale might net a homeowner. Michigan is fourth in the nation in underwater mortgages, with 38.5% of homes — or 532,774 — underwater.

Those who walk away often do so after failing to negotiate a loan modification or a short sale. Sometimes they need to move out of state for a better-paying job, but they can’t sell their house.

“The good, straight people of the world will feel, ‘How can I walk away?’ ” said Southfield real estate attorney John E. Jacobs. But with an economy still struggling, he and other experts said, the stigma of defaulting on a mortgage even if one can still pay is disappearing.

“When things are that bad, your moral compass, and the obligation to make payments that most people feel, has to give,” Jacobs said.

Walking Away

Sondra Malone, 35, bought a house in Eastpointe in 2005 with an adjustable-rate mortgage. The $1,200-a-month payment on the house, along with high heating bills, an expensive SUV payment and other family expenses, quickly buried her in debt.

At the same time, the bottom was falling out of the housing market with record foreclosures dragging down home values. Malone was soon underwater on her mortgage. She owed $116,000 on a house she listed for $99,000 in 2007.

After trying to work out a lower payment with her bank, and trying to sell her house, Malone rented a condo in Sterling Heights and walked away from her house in 2007.

“I didn’t know what else to do,” said Malone, a social worker. “I’m embarrassed.”

Malone said she has been through too much to worry about the lender coming after her. Soon after walking away, she had to deal with major health issues. And she lost her mother last year.

“They’d better go after a whole lot of other people,” said Malone, adding that the foreclosure is now on her credit report. “When you have 10,000 or 20,000, what’s one?”

Read more here: http://www.freep.com/apps/pbcs.dll/article?AID=/20100307/BUSINESS04/3070529/1318/A-flood-of-underwater-homeowners-walk-away&template=fullarticle

Increasing numbers of Californians are suing lenders to avoid foreclosures

Tracey Kaplan and Maria J. Ávila López, Mercury News

Two weeks before their Sunnyvale home was to be auctioned off on the courthouse steps, Sonia Leverman and her sons seized on a desperate David-vs.-Goliath strategy: They sued their lender.

Everything else the Levermans tried had already failed. By turning to the courts, they joined a fast-growing number of fearful and frustrated California home- owners who hope litigation will allow them to hold onto the American dream — maybe at a lower monthly mortgage cost, maybe just for a while longer until the inevitable foreclosure.

In the last five years, the number of foreclosure lawsuits filed in federal court in California has ballooned — like an exploding adjustable-rate mortgage — from only 29 statewide in 2005 to nearly 1,400 last year.

Many such lawsuits also are filed in state courts, which don’t track the numbers or the outcomes.

Read more here: http://www.mercurynews.com/crime-courts/ci_14500350?source=rss&nclick_check=1

Counseling Helps Borrowers Avoid Foreclosure

Troubled homeowners who receive housing counseling are 60 percent more likely to avoid foreclosure and have their mortgage payments lowered significantly than borrowers who navigate the process themselves, according to a study to be released Wednesday.

The study, by the D.C.-based Urban Institute, examines the effectiveness of the government-funded National Foreclosure Mitigation Counseling program, established in late 2007 to counter growing foreclosure rates. More than $300 million has been awarded to 1,700 nonprofit housing-counseling agencies since December 2007 to hire staff and conduct outreach to troubled borrowers. Read more about foreclosure counseling…

Do you own a law firm? Would you like to utilize our mortgage auditing services for foreclosure defense cases? Contact MFI-Miami now.

Federal Program to Prevent Foreclosure Creates Confusion

A federal program designed to help homeowners avoid foreclosure has left many confused about who qualifies, how it works and how to navigate the process.

Meanwhile, banks and consumer counseling agencies have been swamped with requests for help.

Stacee Shrauner has battled for months to understand the program and the worries are piling up. Her family business hit tough times, money has been tight, and she got behind on the mortgage. Now she fears she could lose her house, she said. Read more about preventing foreclosure…

Do you own a law firm? Would you like to utilize our mortgage auditing services for foreclosure defense cases? Contact MFI-Miami now.

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