I live in one of the worst real estate markets in the country with 60% of mortgages underwater and a foreclosure rate in the top 3. My home value has plummeted but DH and I keep plugging away at the mortgage.
I know of several people who are walking away from their homes. These are people who have not suffered job losses or major financial setbacks. These are people who have decided that paying off the loan is not worth it due to the loss of equity. Their reasoning is that they are actually making a smarter financial decision than I am. They are walking away from 100's of thousands of dollars in debt that according to the "experts" in our area will take 18-25 years to recoop
if it ever does. They view the decision to "ruin" their credit as a timely decision "lots of people are in the same boat, if ever there was a time to have bad credit now is it since we won't be alone". They plan to re-buy in a couple of years at significantly lower prices.
I struggle with this, I was taught that ones credit rating was reflective of ones personal character and it is really hard for me to think of destroying it on purpose. I am not talking about situations beyond ones control ie job loss etc. I am talking about willingly and knowingly just walking.
Nevada is a recourse state which means the banks could feasibly come after them for the balance due, however there are lots of "experts" who are now walking homeowners thru the process and making sure they get lien releases etc. which save them from further repercussions.
I have 2 neighbors - one across the street and one directly next door. Bonehead across the street has not made a house payment since Oct 2007 - yes, you read that right, 2.5 years. Meanwhile he has toys and a new girlfriend who he wines and dines, dinners, concerts, spa's etc which he posts all over his Facebook. Grrrr but he won't mow his lawn "Until the bank decides whether or not I can keep the house"
OMG it is a disaster to look at. Neighbor next door makes twice what DH and I do but they are spenders and live way beyond their means. They figure they can get a couple of years out of the bank and have stopped making their payments. Oh, and during the boom both of my neighbors maxed out their equity for toys, trips etc. Meanwhile, here we sit, plugging along doing what we think is "the right thing to do" and wondering if it really is the right thing to do