Underwater Homes

Underwater Homes

For many families the American dream of home-ownership has turned into a nightmare. Instead of building equity and wealth they are paying on a home with a value much less than the outstanding balance of their loan. In spite of the recent home price appreciation,

CoreLogic reports that as of August 2013 over 7.1 million homes are underwater. For many homeowners it will be years before they can get out of their negative equity position.

Most lenders when they do loan modifications refuse to offer principal reduction and as a result over 50% of all modified loans re default.Professor Brent T. White from the University of Arizona in his paper “Beyond Guilt in the Housing Crisis: The Morality of Strategic Default” writes:“Unfortunately, as long as Congress is unwilling to force lenders to write down underwater mortgages, many homeowners will understandably conclude that the most rational choice for them is to let go of their homes.”

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