Personally helping homeowners with loan modifications daily, and fighting tooth and nail to help get great loan modifications so these homeowners can keep their homes and have lower, more affordable payments, I read the following article with interest. It is certainly a question on many people’s minds, at what point does it no longer make sense to repay a $300,000 mortgage when the home is worth only, say $180,000.

For many homeowners, there is a significant and driving desire to keep their homes with lower, more affordable payments, however, for many others, the big question is, is it really worth the fight? You be the judge! Take a gander at the following article and feel free to share your feedback in the comment area below.

Homeowners who are significantly underwater with their mortgages should consider walking away from those, according to Brent T. White, an associate professor at the University of Arizona’s James E. Rogers College of Law.

In a paper titled titled “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” White writes most homeowners do not walk away or strategically default as a result of two emotional forces:

• The desire to avoid the shame and guilt of foreclosure
• Exaggerated anxiety over foreclosure’s perceived consequences

“It was a puzzle for me,” he said. “If you look at the percentage of people underwater — many by a large amount — there are still few people walking away strategically. I wanted to know why they were staying.”

In his paper White writes: “These emotional constraints are actively cultivated by the government and other social control agents in order to induce homeowners to ignore market and legal norms under which strategic default might not only be a viable option, but also the wisest financial decision. Unlike lenders, individual homeowners have thus generally not acted to minimize their losses and have born a disproportionate share of the burden from the housing collapse.

“It is a double standard in our financial world,” he said. “If a corporation was heavily upside-down on a home they would walk in a New-York-second. But then we expect homeowners to stay and honor a contract.”

With the backing of behavioral economists he argues that underwater homeowners aren’t knowingly making bad financial decisions, they just can’t cognitively grasp that they would be better off if they walked away from their mortgages.

“The financial costs of foreclosure, while not insignificant, are minimal compared to the financial benefit of strategic default – particularly for seriously underwater homeowners,” White wrote. “For many, default is the ‘in the money’ option by any objective measure. Yet most seriously underwater homeowners aren’t walking away – even as they sink deeper into negative equity.”

White quotes a study that estimates only about one-fourth of homeowner defaults are what would be called “strategic,” describing the rest as due to such things as divorce, job losses or other financial calamities that prevent people from meeting payments.

“I don’t advocate that everyone who is underwater on their mortgage should walk away,” White said. “But it is a decision they should look into with an attorney and a financial adviser and make a decision in their own personal interest.”

By Roger Yohem, Inside Tucson Business

Again, I’m interested in your feedback. If you are in need of loan modification help, complete the “quick-qual” application to the right and a professional will immediately contact you to discuss your financial situation, the likelihood and chance that you qualify for a loan modification or other loss mitigation help, and of course answer any questions that you might have.