John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... A recent column in the Wall Street Journal, asks the question why more homeowners whose homes are under water – that is, the mortgage is worth more than their house – are not simply walking away.
“Even where the bank is coming after them to evict them, it is taking months, maybe years. During that time they are living rent-free,” Brett Arends, writes in his WSJ column, called ROI.
Banks overwhelmed
He notes that in some states, banks have some ability to come after homeowners for the shortfall. Arends, however, writes that is a threat more in “theory than reality,” because banks are so swamped with foreclosures. Also, he notes, distressed homeowners typically don’t have enough “surplus capital” to make it worthwhile for a bank to go after them, anyway.
“The ruthless and the reckless have already walked,” Arends writes. “Meanwhile, the middle class continues to pay through the nose.”
He notes that Japan struggled for two decades with its “zombie banks,” so named because if they recognized their debt, they would be insolvent.
“Here in America, we have millions of zombie homeowners. Why is this any better?”
To read the entire column, please go to this link.
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I don’t understand this argument. Do you walk away from your car payments when your car is worth less then your car loan?
Your house may be worth less now, but what if values start to increase and in 5-10 years when the market potentially improves. I guess the same people will want their homes back.