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subject: To Walk Or Not To Walk...that Is The Question [print this page]

To Walk or Not to Walk...That is the Question:

Sure, there are loan modification programs out there. But how effective are they? And do you

even qualify? Many Americans are wondering whether to hang on to a hopeless mortgage, or

just walk and live on to a buy a house after foreclosure.

There could be a number of reasons for being in this position. Perhaps you have been hit by the

recession and lost a job. Perhaps medical bills weigh you down. More likely the value of your

house has depreciated so much, its just not worth it to stick around anymore. Why wait for ten

years for your house to regain its value, when you could be paying less for a better place right

now?

These are not easy questions to think about, however you should not believe in the myth that

walking away from your mortgage is the end of your financial future. It is better to deal with

the lender directly in order to reduce your payment. But since many lenders are not willing to

negotiate, you might have to walk.

You have several options- you could go for a short sale, attempting to get the lender to accept

less than the original mortgage agreement. You could also attempt a deed-in-lieu, which

involves giving the deed of the home to the bank in exchange for the bank not foreclosing on

you.

Of course its possible that your lender will just go ahead and adjust your mortgage anyway.

There are so many people who are having trouble paying, that if you just play chicken enoughyou

may get your way. But be warned, the bank is as good at this game as anyone, and they can

get very threatening with going after their money.

Remember, there are certain states that dont even allow the banks to persecute home owners.

Do the research and see if you live in such an area. And better yet, talk to a lawyer. You want

to make sure that the bank is not going to pursue legal action against you, so you can go on to

buy a house after foreclosure. That means no matter which action you take, a lawyer should be

involved somewhere along the way.

What complicates this issue is that its often near-to-impossible to get someone at the bank to

respond to your efforts to negotiate. Not to mention there are tax dimensions to negotiating,

getting a second mortgage, or walking away. Make sure to speak to the person who does your

taxes. Often times, if a lender does forgive a certain amount-- this is considered INCOME that

can then be taxed.

Overall, its important to do the research and weigh every possible option. In the current market

however, many home owners successfully walk away, and go on to buy a house after foreclosure.

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