# Need lowdown on walking away from mortgage or short sale **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 5, 2019, 10:52pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033 "2019-02-05T22:52:59Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Enola\_Gay](https://avatars.discourse-cdn.com/v4/letter/e/3ab097/32.png) [@Enola\_Gay](https://boards.straightdope.com/u/Enola_Gay)\ **Post date:** [February 7, 2019, 9:05pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/61 "2019-02-07T21:05:50Z")
Agree with Doctor Jackson. There are also tax benefits of owning vs renting that have to be figured in. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [February 7, 2019, 9:47pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/62 "2019-02-07T21:47:10Z")
> [@Omar\_Little](#): > > If the OP walks away and hands the keys to the lender, that’s not really living up to the agreement… The mortgage specifically says exactly what happens if the homeowner stops paying the mortgage. How is he not living up to the agreement? ---
**Author:** ![Enola\_Gay](https://avatars.discourse-cdn.com/v4/letter/e/3ab097/32.png) [@Enola\_Gay](https://boards.straightdope.com/u/Enola_Gay)\ **Post date:** [February 7, 2019, 10:22pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/63 "2019-02-07T22:22:39Z")
Well technically he’s defaulting on the loan/breaching the contract, even if said contracts delineates what happens under those circumstances. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [February 7, 2019, 10:34pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/64 "2019-02-07T22:34:00Z")
> [@Fear\_Itself](#): > > The mortgage specifically says exactly what happens if the homeowner stops paying the mortgage. How is he not living up to the agreement? Read your own mortgage, and quote the portion that says you are permitted to just walk away and turn over the collateral. You won’t find such terms. If you walk away, you are in breach of the contract. The collateral is the remedy to the lender int he event of a breach of contract. In certain states, like the OP’s, you are still liable for the shortfall on the loan, if the collateral value is insufficient to cover the outstanding amounts under the loan, then the borrower can still be held liable. ---
**Author:** ![KneadToKnow](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kneadtoknow/32/3999_2.png) [@KneadToKnow](https://boards.straightdope.com/u/KneadToKnow)\ **Post date:** [February 7, 2019, 10:36pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/65 "2019-02-07T22:36:39Z")
> [@Enola\_Gay](#): > > Agree with Doctor Jackson. There are also tax benefits of owning vs renting that have to be figured in. Well, there are tax benefits to _paying a large amount of mortgage interest_. I am not familiar with any that are directly tied to _owning_. ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [February 7, 2019, 10:42pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/66 "2019-02-07T22:42:28Z")
> [@KneadToKnow](#): > > Well, there are tax benefits to _paying a large amount of mortgage interest_. I am not familiar with any that are directly tied to _owning_. I can’t imagine the interest on a 100K loan, 12 year in, is enough to make itemizing worth it. Assuming they don’t have a ton of other deductions, they probably don’t bother. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 7, 2019, 10:44pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/67 "2019-02-07T22:44:23Z")
> [@Omar\_Little](#): > > If you walk away, you are in breach of the contract. So? This is capitalism, the expectation is that people act in their own best interest. If breaching the contract is in someone’s best interest, then that’s what they should do. The bank would breach a contract with you in a hot minute if they thought they could net $1000 for doing so, even if the breach would leave you homeless looking for dinner out of a garbage can. Note, this best interest includes the totality of the effect, including fees, penalties, credit rating, etc. In this case, it’s probably not worth it, but if it was, I’d tell the OP to do it and not feel the slightest pang of guilt for doing so. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [February 7, 2019, 11:18pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/68 "2019-02-07T23:18:21Z")
> [@Omar\_Little](#): > > Read your own mortgage, and quote the portion that says you are permitted to just walk away and turn over the collateral. You won’t find such terms. If you walk away, you are in breach of the contract. The collateral is the remedy to the lender int he event of a breach of contract. In certain states, like the OP’s, you are still liable for the shortfall on the loan, if the collateral value is insufficient to cover the outstanding amounts under the loan, then the borrower can still be held liable. Breach of contract is part of the contract, so again playing by the rules. If the breach of contract section is valid under the conditions of the breach it is fair game as that is also under the contract. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [February 7, 2019, 11:27pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/69 "2019-02-07T23:27:39Z")
Anyway it’s fun and all talking about the moral aspects, but since they can come after you for the balance, the point is moot, your best strategy would be talk to them and try to arrange a short sale. ---
**Author:** ![betterlifethroughchemistry](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/betterlifethroughchemistry/32/3094_2.png) [@betterlifethroughchemistry](https://boards.straightdope.com/u/betterlifethroughchemistry)\ **Post date:** [February 7, 2019, 11:39pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/70 "2019-02-07T23:39:56Z")
> [@MandaJo](#): > > I can’t imagine the interest on a 100K loan, 12 year in, is enough to make itemizing worth it. Assuming they don’t have a ton of other deductions, they probably don’t bother. The OP said they still owed $100K, not that the original loan was $100K…12 years in on a 30 year mortgage, my WAG is they paid about $135 - 140K, so they are still paying more interest than principle… ---
**Author:** ![Enola\_Gay](https://avatars.discourse-cdn.com/v4/letter/e/3ab097/32.png) [@Enola\_Gay](https://boards.straightdope.com/u/Enola_Gay)\ **Post date:** [February 7, 2019, 11:55pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/71 "2019-02-07T23:55:55Z")
> [@kanicbird](#): > > Anyway it’s fun and all talking about the moral aspects, but since they can come after you for the balance, the point is moot, your best strategy would be talk to them and try to arrange a short sale. I’d first find out how the lender intends to report the short sale to the credit bureaus. Depending on how they report, that can also devastate your credit- and will stay on your reports for 7 years. I still think the OPs best bet, given the cost of rent he reports is to suck it up and stay for a few more years. I’m not sure what market trends are in his area, but it seems to me that the market value of his home was once much higher than it is now. If the real estate market on the rise in his area, he could break even & walk away without any damage to his credit…so long as he can stick it out. ---
**Author:** ![Suburban\_Plankton](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/suburban_plankton/32/219_2.png) [@Suburban\_Plankton](https://boards.straightdope.com/u/Suburban_Plankton)\ **Post date:** [February 8, 2019, 5:41pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/72 "2019-02-08T17:41:42Z")
> [@Littleman](#): > > That’s why banks make money, investment is a risk, a calculated risk, > > If he’s paid for 12 years and we’re looking at a 100k to 80k difference… The bank didn’t lose squat, and probably still made money , probably quite a bit actually. > In any case with these numbers, I’d imagine the loan holders would be willing to negotiate it for maybe no more than you can sell it for. So it’s OK to break the contract that you signed and walk away from the debt that you owe, as long as the other party has more money than you? ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 8, 2019, 6:28pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/73 "2019-02-08T18:28:23Z")
> [@Suburban\_Plankton](#): > > So it’s OK to break the contract that you signed and walk away from the debt that you owe, as long as the other party has more money than you? It’s OK to break the contract that you signed and walk away from the debt that you owe, as long as the other party: - spent decades sitting next to lawmakers crafting the laws that govern mortgages - wrote the contract upon which the mortgage was secured - has rooms full of actuaries and statisticians to ensure that their portfolio of mortgages remains profitable and that future approved mortgages are forecasted to remain so - has a building full of lawyers on call to help them recover every blessed penny they are legally owed ---
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [February 8, 2019, 6:54pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/74 "2019-02-08T18:54:59Z")
You do understand the connection between having funds available to lend to YOU, and getting repaid the monies they lend out, right? ---
**Author:** ![Suburban\_Plankton](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/suburban_plankton/32/219_2.png) [@Suburban\_Plankton](https://boards.straightdope.com/u/Suburban_Plankton)\ **Post date:** [February 8, 2019, 7:23pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/75 "2019-02-08T19:23:36Z")
> [@Cheesesteak](#): > > It’s OK to break the contract that you signed and walk away from the debt that you owe, as long as the other party: > > - spent decades sitting next to lawmakers crafting the laws that govern mortgages > - wrote the contract upon which the mortgage was secured > - has rooms full of actuaries and statisticians to ensure that their portfolio of mortgages remains profitable and that future approved mortgages are forecasted to remain so > - has a building full of lawyers on call to help them recover every blessed penny they are legally owed ah, so it’s a"victimless crime", is that it? ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 8, 2019, 7:39pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/76 "2019-02-08T19:39:32Z")
> [@elbows](#): > > You do understand the connection between having funds available to lend to YOU, and getting repaid the monies they lend out, right? Lending money to ME isn’t a gift to me, it’s a business transaction. If they can’t manage their business, and previously loaned money secured by hilariously inadequate assets, that’s not my problem, it’s theirs. They know the rules and how the mortgage market works better than 99% of their customers, they can manage if a few underwater borrowers default and they don’t get back 100% value from their loan. It’s a risk, it’s a cost of doing business, a cost that their actuaries should have told them about, and they should have incorporated into their pricing model. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 8, 2019, 7:40pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/77 "2019-02-08T19:40:57Z")
> [@Suburban\_Plankton](#): > > ah, so it’s a"victimless crime", is that it? Not even remotely correct. It’s what we in business call “business”. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [February 8, 2019, 7:55pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/78 "2019-02-08T19:55:18Z")
> [@Suburban\_Plankton](#): > > ah, so it’s a"victimless crime", is that it? It’s not a crime at all. Breaching a contract is deemed to be so normal that civil courts can’t even award punitive damages for a breach. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [February 9, 2019, 3:02am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/79 "2019-02-09T03:02:29Z")
Well the consequences of breaching the contract are that you are labeled as someone that breaches contracts, and your ability to enter into such contracts again is severely limited. Just as if the financial institutions regularly didn’t live up to their side of the contracts they would lose significant amounts of business as well. ---
**Author:** ![echoreply](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/echoreply/32/3641_2.png) [@echoreply](https://boards.straightdope.com/u/echoreply)\ **Post date:** [February 9, 2019, 6:01am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/80 "2019-02-09T06:01:45Z")
> [@Doctor\_Jackson](#): > > The expenses, including property taxes, the OP will still be paying in an apartment. The landlord will have set rent at an amount that will enable him to recoup monies spent on taxes and upkeep AND turn a profit. Rent is set by the market. A landlord hopes that it is enough to cover mortgage, taxes, upkeep, HOA, and still turn a profit. If it is not enough, then the rental unit is a bad investment. If the OP is in a city with very depressed real estate prices, it is possible that rent may also be low, because landlords are just hoping to make something, and a glut of empty units is keeping the price lower than what is necessary to break even, but they don’t want to sell because they’re upside down, too. Even if real estate prices are depressed, there may be a low vacancy rate, so rent is actually high. [Previous page](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033.md?page=3) [Next page](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033.md?page=5)