Is a home an investment or simply a dwelling where we reside? Should I give the lender the keys to the house the moment it is worth less than the balance of the mortgage? Is it okay to walk away?
Here's the dilemma. The Jones family lives in a beautiful home in a Phoenix suburb. They have children whose only memory of home is that house. They refinanced the home a few years ago when values were high and pulled some cash out. The cash was used for a variety of things. As home prices have fallen, and fallen, they find themselves with a loan balance that is two hundred thousand and fifty dollars more that what the home is actually worth today. Fortunately, both Mr. and Mrs. Jones fall into the 90% of people who are still employed and are capable of making the mortgage payment.
Mr. Jones looks at the situation and decides action must be taken. Men are problem solvers and this "upside down" issue needs to be addressed. It seems foolish to pay the lender a quarter of a million dollars more than what this home would fetch on the market today. If the lender won't write-down the principal balance, then let's mail them the keys and rent a house in the same neighborhood. A logical and practical solution.
Mrs. Jones views things differently. She doesn't want to move. This is her home. This is where she wants to continue to raise her children. This home is not an investment. The decision should not be based as if it is an investment. If the payment is affordable, then she wants her family to stay put.
This debate is likely taking place in thousands if not millions of households. I am aware of this particular debate, because I know the Jones's. That's not really their name. It has been changed to protect the delinquent. My own opinion is that people should keep their homes if they can still afford them. I will admit that I have not been placed in their situation, at least not yet. I don't envy their dilemma.