According to RealtyTrac, nearly 3 million foreclosures were filed in 2009. And with almost 10 percent of all mortgages now delinquent nationally, those homeowners are faced with a painful decision: continue to make payments even if they are underwater, or do a “strategic default.”
In January, 2006, a young professional couple with two children bought a three-bedroom home in Salinas, California, for $585,000. With excellent credit, they signed the papers for a no-money-down, 30-year, fixed-rate mortgage, with payments of $4,300 a month. Today, the balance they owe is $560,000, but the present market value of their home is estimated to be about $187,000. Here is their dilemma: They made a promise, and signed on the dotted line, fully expecting to make timely payments over the term of the loan. But there is a home for rent just down the street with payments of just $1,000 a month.