My House is upside down. I am walking

Strategic Defaults

Deutsche Bank is estimating that 48% of all Americans with mortgages will owe more than their home is worth. That is 25 million people! Zillow reports that 20 million were already underwater at the end of first quarter 2009.

Who's suffering the worst?

Option-ARM Borrowers. Also known as negative amortization loans: 77% are underwater.

Subprime Borrowers with bad credit: 50% are underwater.

No-documentation loans, which did not require proof of income: 49% are underwater.

Prime Jumbo Loans for that large purchase: 26% are underwater.

Basic Conforming Loans requiring money down: 16% are underwater.


In light of these devastating reports, is it clear that not every homeowner will choose to keep their home. Expectations have always been that real estate is a great way to build wealth slowly over time, but with the recent accelerated run up and decline in home prices, people are scared. If half of homewners have no equity in their homes, many are looking for a way out of what they see as a bad investment. Voluntarily walking away from your mortgage, but not immediately from the home, is going to be a very popular choice. As we have discussed in earlier blogs, foreclosure is a time consuming process and many homeowners are staying in the home without making payments for 8+ months. Regardless of being able to pay their note, some feel that there is no promise that their house deed will be worth anything of value to them in the near future. If you don't know which way to turn in this uncertain time for real estate, our best advise is to consult with professionals like us who fight for you on the front lines everyday.

Written by Nick Shivers