We’re five years out from the beginning of the housing market’s crash, and home values are lingering at about where they were in early 2002. Many forecasts predict the dark clouds will stay put, both because of the huge overhang of foreclosures and because the federal government has been slow to do anything effective about stopping the decline.
Which begs the question: Why are you still paying your mortgage?
I’m not encouraging anyone to walk away from his or her mortgage; I’m asking what keeps you paying it. I’d like to hear from you, particularly if you bought or mortgaged your house in the boom years. Let’s be frank: your investment in that home is a nonperformer, and it doesn’t show signs of picking up again for at least a few more years. What keeps you paying for it?
Tom Krettler, a broker at ReMax Unlimited Northwest who specializes in distressed properties, says that he has seen a marked increase in the number of Chicago-area homeowners who have opted to abandon their mortgage. “It was a glimmer here in the past,” he says, referring to a time when strategic walkaways were happening in Arizona, California, and other places. But this year, he notes, “it’s becoming very common.” (There are no reliable data on the number of local walkaways this year.)
Some homeowners simply stop paying, letting the foreclosure process unfold while they use what would have been the house payment to clear up other debts. Other people move out, put the former mortgage payment toward a rental, and work with the bank to arrange a short sale.
Krettler doesn’t encourage people to go this route. “It’s agonizing what you go through, and your credit takes a hit,” he says. But he can understand why some people make that choice. “They see that this recovery is going to be longer and longer, and I guess they give up on waiting. You get a job loss or your income goes down, your property taxes keep going up, and this is a situation you want to be free of. You feel like you’re drowning.”
Even people who don’t need to slash expenses—or who don’t need to move for other reasons, such as a growing family—must wonder if their mortgage has become a dead weight. Those feelings are only compounded when they confront the huge losses in home values revealed in Chicago’s annual real-estate charts.
Of course, there are many compelling reasons to stay up-to-date on your mortgage—not the least of which is the ethical obligation. “When you buy a new car, it loses value as soon as you drive it off the lot,” explains Kim Kerbis, an @Properties agent. “But nobody says you should stop paying for it, right?”
So tell me: why do you keep paying your mortgage?