Easy on Those Strategic Defaults

Strategic defaults generally refer to walking away from a home that's underwater. Short sales and renegotiations are much less offensive to mortgage lenders, though they take a bit of work.

More info re. conforming loans (not jumbos): Fannie cracking down on walkaways | Inman News

Speak with an experienced Realtor and an experienced real estate attorney if you're considering any of these options. - David

California Real Estate News: Beyond the Headlines

California real estate articles from various publications are summarized weekly in Beyond the Headlines, from the California Association of Realtors. Here's this week's version, covering such topics as:

- Year over year median prices up 21% in April
- Consumer confidence rising

- What kind of homeowners walk away from their homes?

A quick way to stay up to date!

- David

The 60 Minutes Walkaway: Conscience and Consequences

Debt forgiveness has long been a taxable event.  But the taxability of purchase money mortgage debt forgiven by a lender was relaxed by the Bush Administration and has been further lessened under Obama.

Yet there are limits, and these should not be a surprise to anyone, including those who appeared over the weekend on 60 Minutes bragging about how they plan to walk away from their homes without remorse - - or even to continue living in their homes without paying their mortgages until lenders physically ousted them, just because they can.

A key exception to tax relief

ROI: When It's OK to Walk Away From Your Home - WSJ.com

Do you agree with this statement?  "Walking away from debts is as American as apple pie."  How about this one? "The economy is fundamentally amoral."

To me, the first statement is offensive, the second represents a real quandary in a system based upon honesty and fair dealing, and both define the dark side of the moral dilemma

Long commutes make risky borrowers, study says

How about those folks who buy a home far from their place of employment?  Could that be a predictor of their likelihood to repay their mortgages?

Long commutes make risky borrowers, study says

I think it could, because it may be an indication that they don't really want to live or work where they do, but are driven to do so by financial need.  Think "Riverside" or "Lancaster," and the concept makes more and more sense. - David

As Values Slide, More Weigh Walking Away From Mortgages - NYTimes.com

Where home values have slid to 75% or less of their mortgage, more are considering "walking away," meaning leaving their home for the lender to take back in foreclosure. 

As Values Slide, More Weigh Walking Away From Mortgages - NYTimes.com

This is less the case in the South Bay than in many areas, but it's a trend worth watching.  Banks are certainly not using TARP money to help these homeowners stay in their homes, resisting short sales and loan modifications like the plague.  But short sales are possible, and the consequences with respect to one's credit are less than a foreclosure. - David

Will walking away from a mortgage go mainstream? - LA Times

As earlier reported, it's not my intention to endorse what are popularly being called "strategic defaults." Roger Lowenstein, a former editor of the Wall Street Journal's "Heard on the Street" column, writes about the topic at this link:

Will walking away from a mortgage go mainstream?

Certainly walking away from properties that are underwater on their mortgages will have a seriously detrimental effect on one's credit.  But the concept may deserve thought when a property is so far underwater as not to stand a reasonable chance of recovering that difference in value within a meaningful time horizon.  Food for careful thought; ground that should be treaded lightly. - David

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"Strategic Defaults" - Not a recommendation, but some are doing it

A number of homeowners underwater on their home mortgages are switchng to rentals by walking away.  I'm not recommending this! But here's what some are doing. - David