Why Struggle For Years To Save A Property With No Equity? Forecasts for Underwater Owners

Many homeowners have no equity as a result of over-leveraging their properties and depressed values. The question they must ask is whether it is worth it to struggle to make the payments, even if they are lowered through modification, if in the end they will still have no return on their investment – meaning, that when they go to sell one day in the future, they will get nothing back in their own pocket at the closing. Only the mortgage lender and broker will get paid. If that is the case, why struggle? One answer may be that the owner is trying to recover the money he put into the property as a down payment or for renovations. This raises the issue – how long will the owner have to wait to recover this money? Will the market ever go up again? The NY Times has just written an article which refers to a report on this issue. It states that homeowners may have to wait until 2017 to see positive equity. Of course this is only a guess. No one has a crystal ball.

In my view, I think it will take even longer. It all started back in the wild west financing days of 2005 when everyone did 110% LTV no doc stated income loans. Many people just bought homes or were put into loans by mortgage brokers that they should never have bought or borrowed in the first place. Some of the holes are so deep that it could take at least 10 years or more to dig out. Homeowners who want out now should seriously consider Chapter 13 which allows them to surrender the property and walk away and start fresh. Often, a homeowner can also resolve other debt problems as well while still keeping other important assets. If you want to discuss your situation, please call or email me.

Here is the NY Times article.