Are you a Bad Person if you Walk Away from Your Mortgage?

If you “walk away” from your mortgage are you a bad person? The answer is “no,” as long as you  have examined all possible options and know the consequences of doing so beforehand.

The idea behind walking away is to file paperwork with the lender for the property, turn in the keys and then vacate the property, leaving it to the lender.dreamstime_8339256

The problem with walking away is that it involves an INTENTIONAL FORECLOSURE. As people in desperate situations tend to take desperate measures, at the start of this phenomenon many homeowners did not realize the consequences of their actions. For many, there could have been other options available that would not damage their credit to the extent that walking away does. (As one of the advocates of using the walk away as a last resort, I wrote a book called Mortgage Walkaway Options in 2008. It is available for purchase through Lulu or Amazon, or you may email me for a free download).

With all the programs available to help homeowners now, the fact remains that many lenders are still falling behind on negotiating loan modifications or approving short sales. Frustrated and desperate, walking away remains a popular choice.

One of the biggest factors involved in walking away is the emotional factor. Many feel that they are neglecting their duties–the commitment they made to pay their mortgage–and they feel badly. But walking away can be a viable option for some. Here are my suggestions if you are considering doing so:

dreamstime_25634631.  Contact your lender. Ask for the Loss Mitigation Department. Try to find out if you are eligible for a loan modification. Ask questions, take notes, and have all your paperwork handy (loan documents, bank accounts, employment information).

2.  Call a counselor. HopeNow, the national housing crisis hotline, is a great service and it is free. They can be found at (888)995-HOPE or Talk to them about your options.

3.  Look into the loan help programs instituted by the government. Go to .  See if you qualify under any of these programs.

4.  Contact an attorney in your area who specializes in getting loan modifications. If you live in California there is a great site (run by an attorney who devotes his career to helping homeowners battle the Goliath lenders). You can visit his site at Even if you do not live in California you can get advice and ideas from visiting the site.

5.  See if you qualify for a Short Sale–this will allow you to sell your home for less than the amount owing on the loan, with the lender’s approval, and will not be as detrimental to your credit as would a foreclosure. Make sure you find a Realtor who understands how to handle a short sale, as there is a lot of work involved in dealing with the lender in order to get the sale closed. New short sale laws will take effect in April 2010 that will make short sales easier. Here is a great article on the contents of the new program:,0,4531315.story.dreamstime_3153901

6.  If none of the above options provide you with assistance you may want to consider walking away. BE CAREFUL whom you choose to help you. If you can go through an attorney that is great. If not, make sure the company you use is legitimate and speak to others who have used their services. Make sure you understand ALL the consequence before signing anything–I would recommend having a lawyer look over any paperwork provided by these agencies.

If you decide to walk away from your home and mortgage after investigating other options you should not feel badly. You are amongst a large group of homeowners who have followed the same path, and it will allow you to move on. These are tough times and sometimes you have to take make tough decisions. Knowledge is power. Good luck.

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