Boston Real Estate Law News - Find a MA Real Estate Attorney

Can You Walk Away From Your Mortgage That Easily?

What happens when your house is worth less than what you owe -- i.e., when your home is underwater? What's your best option?

Is it smart to walk away from your mortgage? Is strategic default the answer?

There's no perfect answer for this question. It's a facts-and-circumstances kind of question. Everyone has different facts and circumstances.

Can people really walk way that easily from their homes?

Strategic foreclosures happen all the time. That's when a homeowner simply gives up on his mortgage and walks away, after living in the foreclosing home for a period of time.

And apparently, it's good for the economy. These strategic foreclosures are boosting consumer spending by allowing distressed homeowners to keep more money in their pockets.

The thing is that in a recourse state, such as Massachusetts, you might face the lender coming after you for what you owe them.

In some states, such as California, a mortgage is considered a "non-recourse loan." As such, the lender cannot come after you for the remainder owed on a purchase money mortgage.

But even in a non-recourse state, a secondary mortgage, such as a home equity line of credit (HELOC), might be considered a "recourse loan."

If you foreclose on a recourse loan, the lender could seek a deficiency judgment and collect the difference between the foreclosure sale price and the loan amount.

In Massachusetts, walking away might not be as easy as it is in a non-recourse state. If the loans are recourse, then you may face problems in the future.

So in the end, it may not be so strategic to default.

Tread wisely! And ask a Boston real estate attorney for some advice.

Related Resources