Why Most 'Underwater' Homeowners Never Consider Walking Away

Would you ever considering walking away from your house and giving it back to the bank?

Trulia.com and RealtyTrac.com surveyed homeowners online to ask if they would walk away from their home if they were unable to make the mortgage. In a poll taken May 10 to May 12, using Harris Interactive, only 1 percent said it would be their first choice and 59 percent said they would never consider it.

But 41 percent did indicate they would consider walking away if their mortgage were "underwater."

Yet Trulia's co-founder and CEO Pete Flint said, "For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes." He added, "It now seem clear that government programs will not reach the overwhelming majority of homeowners in trouble."

So why do a majority of Americans paying a home mortgage still believe walking away from it is wrong?

Choosing not to make mortgage payments has been unheard of. Most Americans have regarded the promise to repay a loan as sacrosanct. But with around 11 million families suddenly owning more on their mortgages than their homes are currently worth, making those monthly payments on an "underwater" loan is not always a sound financial decision. "So some of them are making the calculated decision to hang onto their money and let their homes go," reported Roger Lowenstein in a landmark article in the New York Times back in January. "Is this irresponsible?"

Apparently a majority of Americans think it is. Lowenstein argued that there were two reasons strategic defaults were not looked upon kindly. The first is that "foreclosures depress the neighborhood and drive down prices." The second is that "default (supposedly) debases the character of the borrower." But in a time when businesses routinely default on buildings when their values plummet, and when mortgages often get resold shortly after they are issued, it's harder than ever to identify keeping up on your mortgage as a moral act.

Jon Maddux, co-founder of You Walk Away.com, which helps people strategically default on their mortgage, thinks "it's easier said than done" when a person takes a strong stance on this issue. "I think people are quick to judge and don't look at the whole picture." While he thinks it's "noble and respectable" to say you won't walk away, sometimes it's "financially smart or financially responsible."

He explains that sometimes you're living in a home in a neighborhood where you no longer want to live, as you watch your house price continue to drop. You may find that families moving in around you making significantly less than you do. They could be paying half the amount of your mortgage payment.

"While your new neighbors may be excited about getting a house so cheap," Maddux says, "now yours is cheap too, but not to you."

You also could find your neighborhood filled with renters "who don't have roots or a desire to set down roots in the community." Instead, he says, you could find the homes around you being bought and sold by real estate investors "taking advantage of the low price to buy, flip it and make a big profit."

Walking away from your home may become the only option as your neighborhood continues to deteriorate. You also might get a job offer in another city and have no choice but to walk. If you've been waiting six months or more for that job, do you really want to give it up just because you can't afford two homes and you don't want to walk away?

Still, the stigma of voluntary default lingers. Ideally, making the best financial decision also would be the best ethical decision. Unfortunately, that may no longer be possible.

Lita Epstein has written more than 25 books, including "The 250 Questions Everyone Should Ask About Buying Foreclosures."

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