Massachusetts homeowners facing foreclosure should consider reading Arizona Law Professor Brent White’s new book Underwater Home: What Should You Do If You Owe More on Your Home than It’s Worth? The book makes some excellent points that Massachusetts homeowners facing foreclosure should consider. For example, according to Professor White, it does not make sense to default on your mortgage if you are less than 10% underwater on your home loan. The book contains practical advice such as looking at a default verses the cost of renting, with detailed calculations in the book.
Dr. White notes that “before you any make a final decision about what to do about your underwater mortgage, you should talk to an attorney…[because] [T]his is a big financial decision with long-term consequences, so it’s worth spending a few hundred bucks to get it right.” He points out that there will be a 100 to 150 point hit on your credit score from a foreclosure, but also points out that “it’s possible to have a good–or even great–credit rating again within two years after a foreclosure.”
Professor White discusses guilt about walking away from a mortgage. “A mortgage contract, like all other contracts, is purely a legal document, not a moral promise.” In other words, don’t feel guilty, because it is a business decision. There is also a discussion about planning for a foreclosure; similar to planning for bankruptcy. There is some excellent step by step advice.
There are numerous businesses, such as You Walk Away, offering advice to homeowners regarding foreclosures as well.