Should I walk away from my home?

(Originally published October, 2010)

My Selling Savannah Now newsletter, which is currently more read than my website, generated a reader question:
"Joseph, my home is valued far less than what I paid for it and I can't afford my mortgage payments. I am tired of struggling; should I just walk away?"

Dear Reader, The answer is NO!

Please consider all your options. Perhaps you could rent a room in your house for $500 a month. Could you rent your home and downsize to an apartment?  Have you explored all refinancing options? If your lender agrees, you can renegotiate the interest rate, the number of payments and even the balance due. Talk with your lender about obtaining permission to sell the house for less than the balance due on the mortgage in a short sale. Talk with a lawyer about bankruptcy. Please do not walk away. Here's three reasons why.

Even though the Whitehouse officially rejected a foreclosure moratorium on October 12, 2010, that is not a "green light" to have your home foreclosed on. This is an election year and, as we've seen so far, a foreclosure moratorium is still a big issue in battleground states.

And remember that on June 24, 2010 Fannie Mae amended policy "to encourage borrowers to work with their servicers and pursue alternatives to foreclosure." And by "encourage" they meant punish defaulting borrowers who walked away and did not have that capacity to pay or did not complete a work-out alternative in good faith with their lender.

Punish how? By making the borrower ineligible for a new Fannie Mae loan for seven years starting on the foreclosure date.

Now that this policy is in place, I'm willing to bet it will become more stringent to encourage even more people to pursure foreclosure alternatives.

Lastly, Georgia is a judicial foreclosure state and deficiency judgments are allowed. This means that if you walk away a lender can sue you for the difference between what you owe on the house and what it is worth. And this could occur years down the road after you've gotten back on your feet.

Go over your budget carefully and do your research. Walking away seems easy, but in the long run it definitely is not.
http://www.fanniemae.com/newsreleases/2010/5071.jhtml?p=Media&s=News+Releases&searchid=1287691844653