Homeowners have started to get wise to the fact that, even if they don’t bother making payments, lenders won’t be evicting the residents any time soon. For a while now, more and more articles have been appearing the press noting big increases in the number of people who simply stop paying their mortgages. In the past, however, the attention has tended to focus on people who walked away from their homes. But why walk away when you can live in the house for free?
In many states, it’s quite reasonable to assume that one can continue to live in a foreclosing house for months or even years without making a payment. There are generally two reactions to situations like these. One either condemns the borrower for not making good on his debts, or one concludes that the banks had it coming, and that this strikes a small blow for the little guy.
But this isn’t an either/or situation. The borrowers threw caution to the wind and assumed that buying a house was a riskless proposition. Every mortgage broker and real estate agent on earth told them so. Still, the borrowers should have done their homework and hired a good mortgage broker instead of hiring a semi-literate cousin who joined the mortgage biz the day before yesterday. Eventually, the borrowers will make good on their end of the bargain. They couldn’t make their payments, so they’ll have to turn the collateral over to the lender. In some cases, they’ll even still owe money to the lender in the case of a deficiency judgment.
There is no doubt that many of the borrowers who decide to stop making payments are behaving rationally. Their credit is already ruined, so if they don’t see any chance of a short sale or a meaningful change in the size of their monthly payments, they might as well
