When homeowners just walk away...

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Commenter Take Five points out an ominous little item over at Calculated Risk today: Wachovia reports that some homeowners who can afford to pay their mortgages are now opting instead to walk away from their homes and their debts:

‘From the Wachovia conference call: ‘Part of one of the challenges is, and we’ve mentioned this before, a lot of this current losses have been coming out of California and it’s -- they’ve been from people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties, and so in a way, we may have -- it’s hard to know right now, but we may have seen somewhat of an acceleration problem loans as people have reached that conclusion and we’re just going to have to see how the patterns unfold here.’ ‘

CR points out that this is a growing worry among lenders -- that it will become socially acceptable for homeowners to walk away from their mortgages. Against that backdrop, the Bush administration’s push for a rate freeze for some sub-prime homeowners takes on a slightly different tint: it’s a subtle reminder from the government that home ownership is worth fighting for.

While we’re on the topic: Today’s DataQuick report on California foreclosures also contains an ominous ‘below the headline’ observation: ‘Of the homeowners in default, an estimated 41% emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 71%.’ If you do the math, that means homeowners going into default now are more than twice as likely to lose their homes as homeowners who went into default a year ago.

Hat tip: Take Five
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