The result, strategic defaults -- people walking away from the property and mortgages not because they have to, but because they can.
The key consideration is time, said Jon Maddux, of YouWalkAway.com, which helps people turn their properties back to their banks. Some experts estimate nearly a third of all mortgage defaults -- 31 percent -- are of the strategic variety.
RealtyTrac reported 2 million foreclosures in September and said one in 371 housing units received a foreclosure notice.
Easy mortgages made people glorified renters rather than proud homeowners, with no emotional or financial ties.
"People who made the decision to buy at the wrong time got stuck in a house that may not recover (its value) for 10 to 15 years. Does it make sense to keep it as an asset? No. It's throwing good money after bad when it takes so long to break even. So they decide to stop now. Their credit will recover in three or four years," Maddux told UPI.
"Life is too short," Jeff Horton, 33, of Orlando, Fla., told the Chicago Tribune earlier this month. Horton has $400,000 in mortgages with Bank of America and said he decided to walk away from his loans because he can't sell or rent the properties for enough money to cover the payments.
As the housing bubble burst, real estate values plummeted and homeowners found themselves "underwater" -- owing more than their homes were worth.
"I felt guilty at first," Horton told the Tribune. "It all stopped when I saw them (Bank of America executives) take $90 million in executive bonuses. They take bailout money and do nothing for the little guy. They wouldn't do anything for me."
Banks made the situation worse, giving people who wanted to refinance a hard time, even refusing to do anything for them at all -- sometimes because the homeowners were still making payments.
Chris Deaner of Sun City, Ariz., told CBS' "60 Minutes" he was fed up. Deaner and his wife bought a house in 2006 for $262,000 but the property is worth only $142,000 on today's market. He asked his bank for help.
"They refused to," he said. "They said it was gonna affect my credit and they were gonna take my house. And I pretty much said, 'Go for it.'"
The federal government has to take some of the blame. As Washington pushed banks to make homeownership easier, bankers heard "open the floodgates," Maddux said. Banks started offering no-money- or little-money-down mortgages to people who wouldn't be able to sustain the payments for the long-term, then bundled the mortgages into security instruments and sold them off.
"They (the banks) didn't hold the paper any more. … They felt no responsibility to make good loans," Maddux said. "They only had to be good for a little bit of time and then they could sell them off. It was make money quick and pass the hot potato."
Gone are the days of George Bailey's Building and Loan where the bank took its proceeds and invested them back into the community.
But home ownership still is usually one's biggest investment and there are indications attitudes toward mortgages are changing.
Freddie Mac, the Federal Home Loan Mortgage Corp., reported last week people are putting more money into their mortgages rather than taking out when they refinance -- something that was all but unheard of in recent years. The report said 33 percent of refinancers put more money into their principle, compared to 18 percent who pulled equity out.
Foreclosures are running 65 percent higher than last year in the third quarter, RealtyTrac reported.
"The underlying problems that are causing homeowners to miss their mortgage payments -- high unemployment, underemployment, toxic loans and negative equity -- are continuing to plague most local housing markets," RealtyTrac Chief Executive Officer James Saccacio said. "And these historically high foreclosure rates will continue until those problems are resolved."
And the foreclosure process itself is not without problems. A number of large mortgage lenders in the past month halted foreclosures because of paperwork errors and Wells Fargo last week admitted problems with 55,000 of its foreclosures, although saying the problems were minor and no one who was current on payments had been affected.
"People need to know a mortgage contract clearly spells out you have two options: You promise to pay and if you don't you'll give the property back to the lender. It's not a solemn oath you're going to pay," Maddux said.
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