In California that would generally not be an available remedy to the lender because of strict anti-deficiency laws, but in Washington it might be possible for the lender to go after you for the deficiency. Legal advice should definitely be sought before walking on a mortgage, as others have said.

Cheers,
Michael P. Lindekugel
Financial Analyst
RE/MAX Commercial
Team Reba – RE/MAX Metro Realty, Inc

Is considered blatant advertising and self-promotion on someone else’s blog. The absence of any others doing that is a tip off

You’re wrong.
The IRS rules have been changed.
The so called ‘income’ derived from forgiveness of debt on a person’s primary residence is no longer taxed.
See link below:

http://www2.ljworld.com/news/2008/mar/07/new_irs_rules_could_help_homeowners/

Keep your cheers, you’re gonna’ need them.

Dave is doing the best he can, and that’s all he can do. With a 1/3 price drop, it doesn’t make sense for him to wait for better times by renting it out. It would more than likely simply delay the inevitable. Better to get it behind him now.

I hate the whole credit score system. Always did. Being just ” a number” was not good for our society in any way shape or form. 700 plus equals “good person” vs. 600 minus equals “bad person” makes me nauseous and does not come close to the real life circumstances I come across in real estate every day.

His proposed solution (stop paying, save some cash until foreclosure) is the most rational choice he’s got. I just hope the military doesn’t hold it against him–I know bad credit can impact security clearances and even military promotions.

I think it will depend on family circumstances. People moving out of the area for new jobs elsewhere may walk. People who moved in with three children who just started new schools, etc…would more likely be happy for temporary relief to hold them until things get better.

There is no one size fits all solution. I’m not real supportive of people looking for relief or forgiveness of debt if the property was purchased as an investment vs. a primary residence. The nature of investment is sometimes it pans out and sometimes it doesn’t. I don’t understand how someone can have three successful flips projects that made money, and then want to be left whole if the fourth one doesn’t pan out.

> If they don’t sell until values go up again, they shouldn’t later pocket the money the bank forfeited at this time.

That’s a problem is it? The owner has 2 choices:
A. walk away, buy another house free and clear at a lower price
B. negotiate with bank to own the current house at a lower price, but
with a lien.

B. let owner to stay in the current house, assuming they have attachment, but A. holds more economic advantages.

Walk away will continue, more owners would clamor for principal write downs, those who don’t get it will sue, bank lose more money than foreclosure.

Personally I’m less against bailout of owners of 1 home that has no HELOC on them. But bailout of investors and HELOCers at the expense of banks and investors? No way.

Clearly they can leave anytime. All we’re saying is if the bank makes it possible for them to stay, the bank shouldn’t write off $100,000 and then the owner gets a big profit at the bank’s expense somewhere down the road. If they don’t sell until values go up again, they shouldn’t later pocket the money the bank forfeited at this time.

“As soon as you pay off this $200K lien, you’re free to go”