Professor advises underwater homeowners to walk away from mortgages

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By Kenneth R. Harney

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.
That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."
White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.
Doing so, he suggests, could save some of them hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.
"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."
Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, "one can have a good credit rating again -- meaning above 660 -- within two years after a foreclosure."
Better yet, homeowners can default "strategically": Buy all the major items they'll need for the next couple of years -- a new car, even a new house -- just before they pull the plug on their current mortgage lender.

Professor advises underwater homeowners to walk away from mortgages -- latimes.com

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