Continuing worries over potential strategic defaults by underwater homeowners have many who feel that mortgage servicers may allow more short sales for underwater homeowners who face a negative equity situation on their home loan. Obviously, short sales have been one way which homeowners have escaped the difficulty which is associated with an underwater mortgage in cases where they are unable to meet their monthly mortgage payment and face foreclosure as a result.
A report on housingwire.com recently stated that there are economists who feel that drops in home prices may continue in 2011, and this could raise the risk that borrowers will simply walk away from their home. Yet, there are concerns that these strategic defaults could lead to further damage in the housing market as it could lower some property values further if homes are simply left sitting empty.
Traditionally, homeowners who have qualified for short sales on their underwater mortgage have been those who have been able to prove they are facing particular hardships related to an underwater home loan and face defaulting or foreclosure as a result. Understandably, homeowners who have to default on their home loan are typically in a situation where they do a great deal of damage to the credit and greatly hinder their opportunities for reentering the housing market for quite some time.
While there have been some homeowners who are unconcerned with the effect that a strategic default will have on their credit score or financial life in general, there are homeowners who have found themselves legitimately in a situation where they simply cannot make their home loan payment, but have attempted to forgo the loss of their home through various mortgage modification programs or other foreclosure prevention efforts.
Obviously, homeowners who are in an underwater mortgage situation are either those who wish to simply walk away from what they deem to be a bad investment or homeowners who have attempted to save their home but now face the possibility of foreclosure despite their best efforts. It’s the latter group that have mostly seen opportunities by banks to short sell their home, even though there have been difficulties and troubling stories which have arisen. Yet, there has been speculation also that homeowners who simply wish to walk away from their home may see more opportunities to short sell their home as defaults on home loans can be quite problematic for servicers and, if homeowners who are considering strategically defaulting are given this option, it may help keep empty houses off the housing market.
It goes without saying that short sales are no guarantee, even for troubled homeowners who have attempted to continue making underwater mortgage payments or find affordable solutions to their predicament, but as foreclosures may begin to cost banks more in 2011 and homeowners, in some underwater situations, have walked away from their home due to the lack of incentive they have to continue making payments. There may be increases in short sale opportunities even for homeowners who want to walk away from their home, though but some analysts feel that homeowners who want to walk away may not take to time to explore short sale options. While, again, there are homeowners who are unconcerned about the drawbacks of walking away, it’s hoped that if more short sales are used, strategic defaults may be limited in the housing market, even for homeowners who are ready to simply walk away from their home loan, as they may be able to escape their underwater mortgage situation without doing a great deal of damage to their credit.