LyrArc Article Gist
Research shows that when a home's value falls below 75% of the amount owed on the mortgage, the homeowner thinks hard about walking away even if he has the money to keep paying, as it does not make economic sense to keep paying. By 3rd quarter 2009 4.5 million Americans reached this point and by June 2010 it is estimated by Corel Logic, a real estate firm, that 5.1 million will reach the 75% point- or 10% of all mortgages. Homeowners who made the mistake of buying as the market was cresting are seriously considering walking away and bank's reluctance to reduce the payments is for them the last straw. The Obama administration hasn't helped as this comment by assistant Treasury secretary for financial institutions, Michael Barr, shows. He discounts the idea that many people will walk away from their homes, saying that the overwhelming number will stay in their homes. Consultants at Oliver Wyman show from their research that at least 17% walked away from their homes even though they could make payments in 2008, or 588,000 people, and this was before the full impact of the global financial crisis. These numbers could be much higher in today's depressed market.