Upside Down Homeowners Need Assistance
An estimated 4.5 million homeowners owe more than their property is currently worth. That number is likely to peak at approximately 5.1 million in June of this year, affecting more than 10% of America’s homeowners and increasing the chances of them just walking away from their mortgage.
“We’re now at the point of maximum vulnerability,” says Sam Khater, senior economist with First American CoreLogic, the firm that conducted the recent research. “People’s emotional attachment to their property is melting into the air.”
Consultants at Oliver Wyman calculated that 17% of homeowners defaulted in 2008 (roughly about 588,000) chose to default even though they could make their payments. First American estimates that it would cost around $745 billion – about the same as the original 2008 bank bailout to restore all underwater borrowers to a break-even point.
Doing so would be seen as highly unfair by many taxpayers, says Michael S. Barr, assistant Treasury secretary for financial institutions, but doing nothing would be another blow to an already fragile economy.
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