Monday, December 20, 2010

More see walking on mortgage as a viable plan

With some predictions that housing prices will fall additional 15%-30%, this doesn't good look for banks.  This increase risk might in the increase mortgage rates and fees.  Closing costs have increased due to extra regulations passed concerning good faith estimates.

Just six months ago, a similar survey indicated that only 41 percent of consumers would consider walking if they were underwater on their mortgages.
“It’s a phenomenon we haven’t seen before in the housing market,” said Rick Sharga, senior vice president of RealtyTrac. “The mindset of why people purchase a home has changed over the past decade.”
In the early 2000s, as home prices rose sharply and steadily, many buyers saw their home as an investment. But in the wake of the housing bust, it's clear that a home has become far more of a “utility” — a form of shelter — than an investment.
This is the result of easy credit, no down payment, and crazy mortgage affordability products.  It's easy to walk away when you have put down very little.  In just a 2-6 years you can repair your credit and purchase another house probably  at a cheaper price.
Roughly 23.2 percent of all single-family homeowners who have a mortgage are underwater on their property, according to third-quarter data from Zillow. (Zillow estimates that 40 percent of single-family homes are owned, with the rest mortgaged.)
Major banks, including Bank of America and Wells Fargo, are preparing to work with these owners through modification programs that may include principal reduction or temporary interest-only loan payments until markets improve and refinancing is possible, Sharga says.
But clearly, many homeowners may have motivation to walk. They’ll see their mortgage payments spike at a time when their home value is underwater the deepest.
American homeowners lost $1.7 trillion in home value during 2010, a far higher loss of equity than the $1 trillion lost during 2009, according to Zillow data released earlier this month. Zillow also reported on a blog that less than one-fourth of the 129 metro areas it tracks showed home value gains in 2010.

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