Why Would a Homeowner Consider Defaulting on their Mortgage?

Pretty much everyone who purchased a home from 2000 to 2006 over paid for their homes and now they cannot sell the home for anywhere near what they paid for it.  Those who bought in 2006 (like myself) bought at the peak of housing prices and are more underwater than the rest.  Many of these people are considering defaulting on their mortgages simply because of the fact they over-paid.  This is ridiculous!!  People who over-paid for their homes had no qualms about making an offer on a home and signing the dotted line for the mortgage.  It seems that everyone is forgetting that they made a rational decision to purchase the home at the inflated price and that they are responsible for their decisions!  I do understand, however, that the homeowners who are making the monthly  mortgage payments are frustrated to see that their biggest investment is offering nothing but negative equity.  I purchased my home at the peak in 2006 and now find that it is worth more than a $100,000 less than what I paid for it.  I am either stuck in the house for possibly the next 10+ years or I will have to take the $100,000 hit.  I thought I would be building equity in my home (or at least maintain what I put in it) – not lose my shirt!!  In order to qualify for a refinance or maybe a reduction in principle, you have to be in default or foreclosure.  Default or foreclosure, of course, will wreck you credit.

I have absolutely no plans to default on my mortgage (as long as I am able…knock on wood), but where’s my relief?  I believe our economy depends on people fulfilling their contractual obligations, but I feel I am being punished while others who bought more house than they can afford on one salary are now getting their loan principle lowered and given instant equity.  I won’t see equity in my home for many, many, years……..all for what?  Doing the right thing?

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Tags: foreclosure, mortgage default, pre foreclosure