Foreclosure ‘Walkaway’ homeowners may be urban myth

[Robbien]

Bankers and housing analysts say many homeowners, owing more than their homes are worth, are defaulting on their loans even when they can afford payments. But no hard numbers back up their claims.

. . . Treasury Secretary Henry M. Paulson had waggled a stern finger at homeowners contemplating walking away from affordable mortgages: Do that, and you're no better than a "speculator," he said.

Elsewhere, media reports and Internet postings are rife with stories about the trend and a supposed sea change in American attitudes toward debt. But there's a major problem with all this talk about the phenomenon of solvent homeowners "walking away": There doesn't appear to be any hard evidence that it's actually happening.

When pressed for the number of borrowers who could afford their mortgage payments, major banks and lender groups could not produce numbers figures.

Nor could the Mortgage Bankers Assn., the leading trade group for housing lenders. Spokesman John Mechem said he believed that walkaways by homeowners who could afford their payments were "becoming more prevalent." But he said that was based on "anecdotes we're hearing from our members and what we're reading in the newspapers."

. . . Bank of America spokesman Terry Francisco said the bank had seen indications that some homeowners were taking pains to keep their credit card accounts current at the expense of their mortgage balances, often by raiding their home equity lines to pay their cards, a reversal of traditional customary customer priorities.

But he said the bank did not have "firm figures" on how many homeowners were unnecessarily defaulting on their mortgages.

. . . Fannie Mae Senior Vice President Marianne Sullivan conceded that there was growing "folklore" about residential walkaways but said that the phenomenon was more likely connected to investors than people who live in their homes, or "owner-occupants."

. . .

. . .

Bruce Marks, CEO of Neighborhood Assistance Corp., a Boston-based nonprofit agency that helps strapped homeowners, says flat out that the notion that legions of borrowers are simply deciding not to pay is an "urban myth" that largely reflects the mortgage industry's desire to blame homeowners, rather than their lenders, for the surge in problem loans.


http://www.latimes.com/business/investing/la-fi-walkaway11-2008may11,0,7862151.story

Once again good middle America is being blamed for actions taken by speculators.

Nice to see this article setting the record straight.

[Warpy]

1. The only walkaways here were out of state speculators

who bought up a third of new construction at the peak of the madness in late 2005. We now have an oversupply of the wrong kind of housing stock, the fashionable yuppie barn on the edge of town, with a shortage of family housing in more convenient areas.

[izquierdista]

2. Speculators are bad?

Well send a pot-bellied pig to the beauty shop and call it Miss America! Paulson has a lot of nerve considering that since 1980, Republicans have been giving free blow jobs to anyone who called themself a "speculator". Greed is good, don't ya know? It's the American way, taking on that free-market risk and speculating your way to riches.

[Robbien]

3. So you caught that too

Ha!

The rich and their chutzpah.