Homeowners of a new and unattractive breed are plaguing the Federal Housing Administration these days. Known as “the walkaways,” they are people who find themselves unable to meet their mortgage payments — and to solve the problem simply move out their belongings at night, drop their house key in the mailbox and disappear.
….The rate of mortgage foreclosures has tripled during the past ten years, to an estimated 3.77 per 1,000 mortgages. Most housing economists agree that the leveling off of home prices in many parts of the U.S. accounts for most of the increase. As long as home prices were rising, a homeowner who could not meet his payments could always sell out — usually at a profit. Now, with prices steady, an overextended homeowner must either sell at a loss or face foreclosure.
….Confides a leading West Coast banker: “Again and again I have to tell my branch managers that I would rather have a soundly conceived mortgage at 5¾% than one at 6¼% which goes bad.” Unless the branch managers take this advice to heart, today’s overambitious mortgages will create tomorrow’s walkaways.