Americans defaulting out of anger, fear or despair
Wall Street Journal:
It turns out that many of the Americans defaulting on their mortgages are doing so out of anger, fear or despair rather than making a purely sensible decision about their best financial interests, a new study found.
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Some of these people have stopped paying because they are anxious about their financial situation; others are furious that banks or the government won't help ease their load while other people are getting assistance. Hopelessness is a factor for others.
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." Many borrowers don't seem even to consider strategic defaults until they have "greatly depleted or exhausted" their savings, Mr. White said.
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But Mr. White also sees a "contagion effect," in which people become more likely to default strategically if they know others who have done so.
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Loan-modification programs are supposed to provide hope but sometimes "actually fuel the hopelessness and anger" of borrowers, because these programs "seem designed to wear homeowners down," Mr. White said. Borrowers often can't get banks to respond to their questions and are repeatedly told to send in the same documents.
In addition, lenders typically offer reduced payments only to homeowners who have defaulted or are considered likely to do so imminently. That angers people who have borrowed more conservatively and kept up on their payments but now "feel unfairly left out while the 'less deserving' get help," Mr. White said.
Comments
Even with the federal tax credit and increased real estate sales in January through April, we STILL saw a drop in housing prices.
My advice: if you can afford it, buy investment properties, and keep them for the next couple years.
Best of luck navigating the economy and housing slump,
____________________
Brian