Wouldn’t it be great if all of a sudden our mortgages disappeared; imagine how life would be without the burden of that monthly payment. Well, for many Americans this has become a reality. Not because they won the lottery or inherited a fortune from a long-lost uncle; they just decided to stop paying.
The real estate crash has left millions of homeowners wondering why they should keep paying on a mortgage that is worth, in many cases, twice the value of their property. Homeowners have begun to figure out that the enormous backlog of foreclosures the banks are being faced with has resulted in huge delays in the eviction process.
According to the mortgage tracking company, CoreLogic, there are approximately 3.5 million homeowners delinquent (more than 3 months behind) on their mortgage payments and still living in their homes. It is estimated that nearly 20% of this group are more than capable of making the payments; they just simply choose not to. As real estate values continue to plummet, this situation will only grow worse, as indicated in a report this week by Deutsche Bank, which estimates that 48% of the mortgages in the US will be underwater by 2011.
Traditionally, having your home go into foreclosure was a last ditch measure resulting from a catastrophic event such as loss of employment or medical issues. Now it is being considered a smart business move; why pay more for something than it is worth and will likely never show a return, and with so many people doing it the social stigma of losing your home is quickly being eliminated, as well.
This trend is becoming so common that companies are being formed for the sole purpose of advising people how to stay in their homes without paying. Lawyers are being paid to prolong the foreclosure process, enabling people to avoid payments, for years in some instances, while still enjoying their homes.
Depending on which state you live in, the time-line for taking a delinquent mortgage to the eviction stage can vary considerably. States such as California and Texas allow lenders to pursue foreclosures without the assistance of the courts; however, 19 states, including Florida and New York, require judicial approval in order for the process to continue, and it is the huge backlog of cases in these states that is slowing the process.
Many homeowners who have stopped making their mortgage payments, yet remain in their homes, are merely delaying the inevitable and are saving their money to help with the move once they are evicted. Others are hoping for government assistance to help them out of their situation. Ultimately, an increase in housing prices would be a partial solution to this problem, but with no signs of recovery on the horizon; the number of delinquent mortgages will surely rise.