MichiganRadio

Facing the Mortgage Crisis: Deciding to Walk Away DEARBORN, MI (Michigan Radio) - Tim Westman says he considers himself a responsible homeowner.

"I didn't buy more home than I could afford. I put 20 percent down on the home. I had a fixed-rate mortgage. I made all my payments regularly, was continuing to build equity," Westman says.

But despite putting $100,000 into the home over the past several years, he says if he could sell it, he'd probably be $50,000 underwater.

Westman moved out of his Lake Orion subdivision about nine months ago because of a family situation.

Driving around the winding streets, he points out the many "for sale" signs that have been up for months and, in some cases, years.

"These houses over here on the lake side were selling a couple years ago for oh, between $600,000 or $700,000," he says.

Westman pulls up to a big lakefront house with a moving van out front. He says the owners have been dropping the price for three years.

"They had $425,000 I think on it most recently, and couldn't get anything," he said. "So they're they're packing up, they're taking everything that's left in the house, and they're walking away."

Westman stops the car and gets out.

Movers are hauling boxes and furniture onto a truck, and inside, Annely Matheson is packing up. She says it's been a rough morning.

"I cried all my makeup off," she says.

Three years ago, Matheson's husband took a job in Florida. Annely and their two sons stayed behind for a year, trying to sell the house. But the separation was too difficult, so she and the kids moved to Florida, and the house stayed on the market.

"And now here we are two years later, the house hasn't sold, it's only gone down in value. There's no way we can come back here. There's no work in construction," she says. "So yeah, we're basically walking away."

Matheson says she's tried to get the bank to work out a deal. But she says her lender isn't interested.

"It's funny, we feel like we're penalized because we did everything right," she says. "We did a huge down payment, we kept up with our payments. And for what?"

Lenders say help is available

"No bank, large or small, wants to foreclose. We always lose money when that happens," says Doug Chaffin. He's the president of Monroe Bank & Trust, and for the past year he's been president of the Michigan Bankers Association.

Chaffin says at least half the time, his bank is able to work out a deal to avoid foreclosure. But he says walk-aways are becoming a problem.

"Historically we might have one or two situations a year in our case, and we're seeing it every month now," he says.

Chaffin says homeowners who decide to mail their house keys to the bank should know that walking away doesn't necessarily mean they're off the financial hook.

"Even if they abandon it, even if they stop making payments, they are responsible for any shortfall between the balance of that mortgage and what the bank might obtain in liquidation," he warns.

But homeowners like the Mathesons, in Lake Orion, say the value of their house has fallen so far, and they've put so much money into it, they don't think they'll owe the bank anything.

Tim Westman, the Mathesons' former neighbor, is still deciding what he'll do about his house. But he says it's not his obligation to the bank he's most worried about.

"It's going to hurt my neighbors and friends, it's going to hurt the community, and that's not something I want to necessarily be contributing to," Westman says. "But at some point you have to be able to make those decisions of what's better for me and my family versus everyone around me."

Westman has been able to rent out his house since he and his family moved out. But his tenant works for Chrysler, and has a house in St. Louis that he hasn't been able to sell. So Westman says he's just waiting it out for now - and hoping his delicate arrangement will last through the downturn.


Contact Sarah Hulett at sarahhu@umich.edu
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