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Underwater Mortgages: Why Do They Result In Foreclosure?

Submitted by admin on Friday, 25 September 20093 Comments

I understand an article on Yahoo! Today on underwater mortgages – the situation you are guilty if you secure more than your house than it worth. I do not understand why this leads to a foreclosure. If you can in conflict with to pay to maintain the note each month, what difference does it construct how much your home is actually worth? Is not this the exact status quo that anyone with a car loan is in? Your car is a depreciating asset – but no one "calls" your car advance, just because it is less valuable than the day have you bought it.

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3 Comments »

  • JohnFrom said:

    It also depends on how much deprecation takes place. In some states house values have dropped hundreds of thousands of dollars. The values were inflated way more than they should have been. It was like musical chairs and some of the flippers got caught holding the loans. Then you add to that the trouble in the sub-prime group who were hoping that adjustable rates wouldn’t go up until their income increased over time. Then they could at least afford their costly homes. It didn’t happen. I can see why they walked away. Think about it. How do you sell the house at current market value? Also, if you continue to make payments your amortization is based on an inflated value. Stupid loaners in that case.

    - 26 September 2009 at 12:20 am
  • v b said:

    You understand this correctly–if the homeowner keeps paying on time and the full amount of the payment, no problem.
    Many homeowners seem to think their mortgage and their house are the same thing. They bought a house and RENTED money. Even if the house goes down in value, they still owe the money. Unfortunately many people seem to think that if the value of the house goes down, the bank deserves to take a loss too…so they intentionally stop paying and take a hike. Some even go out and use the last of their good credit and buy another house (at disclosure prices) before shirking their obligations.

    - 26 September 2009 at 12:50 am
  • That Was Quick. . . « John's Blog said:

    [...] Underwater Mortgages: Why Do They Result In Foreclosure? | Loan … [...]

    - 25 September 2009 at 11:54 pm

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