I have friends who bought a home in 2006 for 5,000. They obtained conventional financing with 10% down and were making their mortgage payments. The subsequent real estate meltdown from zero-down-pay-what-you-want loans destroyed the value of their property. Their lender refused to even discuss loan modification. They walked away figuring their credit would recover faster than the real estate market. Their old house is now on the market for ,000. They would have been happy with a mortgage at DOUBLE that valuation with no interruption in revenue or foreclosure costs to the lender. It makes no sense to me. Any insider input?
There’s more to it than personal responsibility. Banks and mortgage brokers hawked unjustified loans to naive buyers. Other buyers took advantage of an opportunity to buy property they knew they couldn’t afford. Countrywide CEO Angelo Mozillo made millions building the real estate house of cards and walked away when it collapsed. This doesn’t change the basic question.
Jeffrey- Thanks for your response. When my friends contacted their lender they were told they needed to miss three payments before the lender (Countrywide) would talk to them. Their response, "Okay, if that’s what you want." It made no difference. They missed six payments. Still no difference. They consulted a real estate attorney and walked away. They now rent a nice home for 0/month less than their old mortgage payment and invest the difference. In seven years when their credit recovers they’ll have close to K-0K to get back into the market.

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