Look before you walk

Maybe you’ve heard of the term jingle mail. It’s when a homeowner mails her house keys (hence the jingling) to the mortgage lender to show she plans to walk away from her house – and outstanding mortgage – to avoid the hassle of foreclosure. Most often, jingle mail stories involve homeowners in an upside-down mortgage – when their home’s value has fallen well below the amount of the original loan. When someone owes far more than the property is worth, it can seem futile to keep making payments, especially when they can barely afford them.

It’s hard to say whether the number of walking homeowners has actually increased or if the news media is just feeding rumors. With an estimated 20 percent of U.S. homeowners facing a foreclosure, it’s not surprising that some would simply throw in the towel. But I’m here to tell you that it’s not as easy as it sounds. First, it’s not exactly legal. Even if you’ve fallen victim to the crumbling housing market and maybe a bad loan (you wouldn’t be the first), you still have to follow through on your promises (unless, of course, you can prove your bank used predatory lending practices – not exactly a piece of cake). Second, it will destroy your credit –and you won’t have a house to live in while you work to build it back up.

No matter how bleak the financial situation, there are always other options, all of them smarter and more beneficial than walking away. First, there’s refinancing and loan modification. It’s a good idea to speak with your lender before making any rash decisions, as some lenders are willing to forgive or at least defer the amount you owe over the value of your home. If that fails (or you’re stuck with an uncooperative lender) there’s always Chapter 13 bankruptcy, sometimes the most sensible solution.

If you can use one of these means to hang on to your home long enough, the market will begin to recover (though no one can guarantee when it will start, or how long it will take). It’s worth a shot. Wouldn’t you rather have either a) a house or b) money in your pocket from selling your house? When you walk, you surrender all of your options.

Unless you’re a financial expert yourself, your best bet is to seek advice from a pro before making a decision. If you absolutely must sell, there are ways to do so without giving up (for example, short sales, in which you get the current value and your lender forgives the rest). If you’re set on keeping your house, bankruptcy is often the surest solution. It will ensure you legal protection (and is the only guaranteed way to keep your home) as you make lowered payments as part of the Chapter 13 plan.

Here at Debtstoppers, we can walk you through the process right for your family. To speak with our experts, simply fill out our free personal financial evaluation or sign up for one of our upcoming community workshops (dates are posted on our website). You can also browse information about foreclosure and bankruptcy. You wouldn’t walk across a street without looking both ways first, right? Well, why walk away from your home without looking at all your options? It’s not a matter of what you have to lose, but of what you have to keep – your house.

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