Should You Just Skip Your Mortgage Payments?

There are many strategies going on these days as people try to get out from under their current mortgages. Some borrowers have legitimate reasons for being underwater on their mortgage, such as a recent job loss or medical emergency. Others, however, simply bought more home than they could afford. Either way, there are ways to make best of the situation. But is skipping your mortgage payments one of those ways?

In Massachusetts alone, there are about 36,000 mortgage borrowers who have simply stopped making their mortgage payments for at least three months. About 12,000 of those borrowers have not made a mortgage payment for an entire year or even longer. These are people who are trying to fight foreclosure, negotiate with their lenders for a mortgage modification or simply living for free until they officially get evicted. Many of these non-paying borrowers are the result of job loss, wage reductions or high interest rates on their subprime loans that the borrower simply cannot afford. After awhile, these borrowers simply gave up trying to keep up with their payments and they are now taking advantage of the lengthy foreclosure process while staying in their home for free.

According to some in the industry, many of these borrowers have been able to stay in their Massachusetts home for a couple years while waiting for the eviction notice to arrive. But with the backlog of foreclosures that lenders have in their system, it takes much longer than normal for the lenders to get around to evicting people. Others simply slip through the cracks for a number of years until the lenders catch up and find them.

Some advocates are saying this is a good thing for neighborhoods and lenders, though. If the people were kicked out of their homes, it could be several months or even years before that home is sold to another buyer. As a result, these neighborhoods could have many abandoned homes which brings down the property value and makes the neighborhoods less safe. Others are saying that the foreclosure process must be expedited to help the housing market rebound as quickly as possible.

There are special situations that are making borrowers decide to stop making payments, too. Richard Zombeck of Salem stopped making payments several months ago when he tried to negotiate a mortgage modification with his lender. The lender would not provide written proof of the loan modification that he was granted so he stopped making payments. He was afraid that if he made payments under the modification without written proof, the bank may seize it and he would be out all the payments that he paid in good faith. His problem began a couple years ago when his mortgage rates shot up to 11 percent. This made his mortgage payments much higher than he ever could afford.

In general, most people who are having mortgage troubles are trying to do the right thing. They are not looking to slip through the cracks or live for free off the lender’s dime. But they have fallen on hard times and simply trying to do the best they can and make the best financial decisions possible for their individual situation.