GMA: It May be Better to Walk Away from Your Mortgage

Mortgage defaults are up 15 percent the past year, with more than 315,000 homes receiving foreclosure notices. That situation, said Good Morning America’s George Stephanopoulos on Feb. 11, has “many homeowners on the edge are considering something that just doesn’t feel right, which is to just walk away from their mortgage.  But Claire Shipman spoke to one expert who is encouraging some homeowners to just do it.”

“There’s a lot of justified fear about what happens if you walk away from your mortgage,” Brent White, a law professor at the University of Arizona began innocuously enough, before encouraging viewers to take the hit and walk away from their obligations.

“It’s controversial but why not just walk away?” Shipman asked.

According to White, homeowners with little hope of return shouldn’t feel compelled to carry out their contractual obligations.  Instead they should be “more objective about the decision” and emulate the acts of certain banks – viewing the contract as a “legal document,” not in terms of a “moral obligation.”

Shipman then interviewed “Heather B,” a single mom who had wrestled with the decision before turning to a website dedicated in helping thousands walk away from their mortgages.

“She might take comfort in the fact that her decision to default on her house is no different really than the decision to default on this property, worth tens of millions of dollars in Washington,” Shipman argued, referring to an office building previously owned by the Mortgage Bankers Association. “Is there a double standard?” We turned to for answers.”

Shipman briefly turned to Gale Cunningham of the National Foundation for Credit Counseling for a dissenting voice on walking away, before returning to White.

White recommended homeowners take the temporary credit hit because it can end up saving the homeowner “hundreds of thousands of dollars.”

Shipman closed with the following advise: “Now remember, it’s something you always want to do very carefully and you should always check the laws in your state before you do it and experts say only consider doing it if you’re 20-30 percent underwater.”

The moral of the report: as long as it doesn’t land you in more trouble, screw your obligations!