February 3, 2010

Phew! I sure am glad to live in Canada.

New research out indicates that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner begins to contemplate walking away from the house…. even if they have money to keep paying.

According to the New York Times,

“In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.

“We haven’t yet found a way of dealing with this that would, we think, be practical on a large scale,” the assistant Treasury secretary for financial stability, Herbert M. Allison Jr., said in a recent briefing.”

Prior to the real-estate collapse began in the United States, the number of Americans who owed more than their homes were worth was practically zero. However, by the third quarter of 2009, there were an estimated 4.5 million homeowners at the critical threshold… with their home’s value dropping below 75 percent of the mortgage balance.

As such, people continue to consider “Jingle Mail” (think about the sound of your house keys in the mail to the bank) as an option.

The difference between letting your house go to foreclosure because you are out of money and purposefully defaulting on a mortgage to save money can be murky. But a growing body of research indicates that significant numbers of borrowers are declining to live under what some waggishly call “house arrest.” New York Times

Yikes! Sure am glad to own my little piece of the sky in Canada.

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