The New York Times just published another article about people walking away from mortgages. Here is the link.
These types of articles are creating a new “norm” where it is “ok” to walk away. They give the example of developers who let an 11,000 unitdevelopment go back to the bank and asked the question why so many people arecontinuing to pay mortgages when they are underwater.
I think that there will be a groundswell of people who walk away because they have to and these looming foreclosures will lengthen the real estate downturn and create further buying opportunities for investors.
The article does not mention one of the key reasons peopledon’tand/or can’t walk away–banks are going after those with an ability to pay with deficiency judgements and lawsuits. If you are going to have to pay the bank back anyway, why not just keep your home, your mortgage and credit in tact? It doesn’t seem fair that developers, like Pivotal Group who owns Promontory The Ranch Club here in Park City, can default on a loan and walk away (and in the case of Pivotal Group, buy their asset back for 20 cents on the dollar) while average Joe’s who signed personal guarantees are on the hook. But that’s a story for another day.