Miami Foreclosure Listings Filled by Underwater Borrowers
Miami foreclosure listings are getting filled with underwater homes as more underwater homeowners deliberately default and let their homes go into foreclosure, according to a recent study conducted by credit analyst Experian and consulting firm Oliver Wyman.
In South Florida, where many houses have fallen in value by 50 percent, many homeowners have deliberately defaulted even if they had the money to pay their loans. They chose to pay their other debts, such as credit card debts, and to have some savings to help them start over.
In Miami-Dade, about 28 percent of mortgage delinquencies in the last quarter of 2008 were deliberate defaults, marking an increase of 8 percent from the last quarter in 2007.
With property values continuing their downward slide, analysts contend that the number of deliberate defaults will continue to rise.
Another reason for the increase in defaults is the disappearance of the stigma of being foreclosed. Foreclosure is now a common occurrence, so it is easier for homeowners now to just give up and move out of their homes or wait for eviction.
Foreclosure defense lawyer Roy Oppenheim said that borrowers who are allowing their homes to enter Miami foreclosure listings are justifying to themselves that many others are getting foreclosed. Oppenheim conducts seminars on strategic defaults and financial options for troubled homeowners.
According to a foreclosure tracking firm, the total amount of all home loans in South Florida collectively exceed the total value of all mortgaged homes in the region by $62.7 billion. In Miami-Dade, about 50 percent of all mortgages are underwater.
As of March, the median negative equity in Broward for borrowers who took out loans in 2006 was $75,000. Negative equity is equal to the gap between the home market value and the mortgage loan balance. The median for borrowers in Miami-Dade was $63,000, based on an online real estate firm.
Andrea Heuson, a professor of finance at the University of Miami, said that she does not blame homeowners for deliberately defaulting because of their significant losses.
On the other hand, William Hardin, a professor of real estate at Florida International University, insisted that homeowners are morally obliged to pay their loans if they can.
Amazingly, strategic defaulters have been discovering that they can repair their credit records after foreclosure more quickly than they expected by just keeping current with their other financial obligations such as credit card debts.
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