Study: Defaults Resulting to Foreclose Homes HUD Intentional
July 24th, 2009 by 
Joseph Smith
About 26 percent of mortgage defaults that led to foreclose homes HUD were done intentionally, according to a recent market study.
According to the study, homeowners who intentionally allow their properties to become foreclose homes HUD do so because they do not want to put more money on houses that are worth less than the total mortgage they owe.
The study was conducted by economists at the Northwestern University, European University Institute and the University of Chicago. Findings of the study put some doubts on the programs launched by the Obama Administration to help stabilize and strengthen the housing market.
The federal government is currently focusing on helping distressed homeowners modify their loans for affordable monthly payments. The study pointed out that the federal approach has ignored the fact that about 20 percent of distressed homeowners own properties that are worth less than their mortgage. It pointed out that the situation can trigger mortgage default.
Northwestern University finance professor Paola Sapienza said that many homeowners who chose to allow their properties to become foreclose homes HUD decided not to pay even if they can still afford to.
According to industry experts, lenders would not waste their time to pursue homeowners who defaulted and allowed their properties to be foreclosed because of the cost of tracking and suing these borrowers.
Meanwhile, the study also showed that homeowners whose properties are worth less than $50,000 of their market value do not have any intention of walking away from their homes. These are homeowners for whom the $50,000 is less than 10 percent of the value of their home.
For those whom the amount represented not more than 20 percent of the value of their homes, 5 percent are willing to walk away from their properties. And about 17 percent of respondents said that they would walk away if the shortfall totals 50 percent of the market value of their properties.
Federal Reserve Bank of Boston senior economist Christopher Foote said that distressed homeowners who decided to walk away from their properties do so because of negative equity and economic difficulties.
Another study suggested that states that have a great number of homeowners who allow their properties to become foreclose homes HUD include Florida, California, Nevada and Arizona where home prices have declined drastically.
