Walking away from home and mortgage: We are at wits end. 6+ years ago we had our house appraised for $157k which gave us about $38k of equity. Today we still owe $114k and the home is only worth about $60k.Totally upside down in the loan now. This is no longer an investment but a burden and just a roof over our heads. I know I should probably speak to an attorney but just interested what the consequences are if one does walk away. We have nothing of value, so we are not worried about someone coming after our assets. We are not worried about our credit rating either. We are thinking of renting or moving out of state and live with family.

From the tenor of your question, it seems to me you have already decided on your preferred course of action: you want to walk away and get on with your life. You’re not particularly worried about any deficiency balance because you have no assets for the mortgage holder to come after (even if they could get a judgment); and you’re not particularly worried about your credit. You may talk to an attorney at some point, but for right now you just want to know what the consequences might be. I think I have all that right.

The two major consequences, damage to your credit and being sued over a deficiency balance, are ones you’ve already considered. Another consequence might be the equity you’d lose if the market ever comes back; but whether the market will come back and, if so, when is something for the pundits to guess at. It doesn’t sound like you want to spend time worrying about that consequence either.

My thought is that you could contact your lender and offer to give them a “deed in lieu” of foreclosure. This is how the lender can obtain vested control of the property without having to spend the time and money that the foreclosure process would involve. It should be an attractive proposal to them, and shows good faith on your part. If you walk away without giving a deed back in lieu of foreclosure, your lender would have to go through the foreclosure process, which is a long, spendy legal process during which time the home value just continues to decline. It should seem a great advantage to the lender to get back vested control of the property sooner in order to get it on the market sooner, mitigating the loss of value. They might even be willing to grant a concession to you for the deed back, such as waiving their right to come after you for a deficiency balance.

I hope this helps you.

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