Mortgage Crisis Triggers Walk Aways

The Washington Independent reports:

Arce and her husband, Pablo, bought their five-bedroom house in 2004 for $605,000 with an interest-only loan, watched it climb in value quickly to $750,000, and then witnessed its steep decline, beginning last year. Panicked, and worried about mortgage payments that are only going to rise, they put it on the market last summer for $550,000. No takers. Lowered it to $525,000. Then $500,000. Nothing. For the past three months, it’s been at $450,000, and offered as a short sale. It’s not moving.

Each morning, they say hello to neighbors out to pick up the morning paper or to enjoy a walk, who bought foreclosed homes at the bottom of the market, paying $420,000 or so for places just like theirs. So they deal with that, on top of the stress of trying each month to scrape together the mortgage payment, something they just can’t manage anymore. They’ve got a lively two-year-old daughter and another on the way. It’s either a short sale or… disaster.

They don’t want to walk away and ruin their credit. They don’t know what to do. And that’s the hardest part of the waiting game—not being sure what might happen next, with none of the alternatives looking particularly good.

"It’s crazy," said Arce, whose income as a mortgage broker took the same steep fall as housing prices. "We just want to get rid of it. It makes no sense to sit here and pay $4,000 every month for the same house that’s selling down the street for $200,000 less."

No comment from the National Association of Realtors on this one.