"Should I just walk away from my house?"
I am asked this question more than I care to admit. So often, in fact - I now have a canned answer:
The decision to walk away from your house is a very personal one that I really can't offer any advice on - but I will be happy to answer any questions about what you can expect to happen if you do choose to just "walk away" from your house...
And after I don't tell them "yes" or "no" as to what they should do, they almost always have questions for me.
It has become so common for someone who has previously perfect credit who currently has negative equity in their home to just walk away that someone, somewhere came up with the term strategic default. When a person decides to strategically default on their mortgage, it means that they can afford the monthly mortgage payment but for business reasons choose to just default on their loan.
And strategic defaults are becoming more and more common in areas where property values have went down dramatically.
According to the LATimes:
Whether there is a moral issue with strategic defaults or not is usually not something I ever bring up. I have found that each person has their own answer to this and I try not to tell someone what they should do when they ask me the question of "Should I walk away from my house?" because in my opinion, it is a very individual decision.
But if you are currently considering walking away from your house, be sure to speak with a Real Estate attorney who knows the laws in your state so that you don't get caught in the "anti-deficiency" trap where your lender could come after you for any deficiency that a foreclosure may cause.
I can't imagine anything being much worse than making a very tough decision like this only to find out that you didn't have all the information.