A great article by Don Lee – Tribune Washington Bureau – highlights how underwater mortgages are a serious contributor to the dismal performance of the national economy. It is estimated that there are 15 million homeowners who are undewater on their mortgages, many of whom can and continue to pay on their mortgage, but have no means to refinance and are stuck paying on homes in which the value may not return for 10-15 years. In other words, they are stuck. Lenders are not likely to offer any modifications so long as they are current on their loans. So for many, it is continue to pay and hope for a quick (though unlikely) recovery in home prices, walk away and suffer the attendant consequences, or hope that lenders become more proactive in offering modification or refinance options. If the economy continues to drag, which by all accounts it will (even with new quantitative easing by the Federal Reserve), the threat of more strategic walkaways in non-recourse states is likely to become a more serious problem.
