Should Underwater Borrowers Stay or Go?

Increasing numbers of home owners are struggling with the decision to walk away from their homes because their mortgages are so far underwater.

Whether it is a good idea or not is an open question with strong arguments on both sides of the decision.

Leaving a home and a mortgage ruins a credit score, complicating future transactions, and makes it more difficult to rent another residence and buy a car.

Despite this potential pain, Glenn Kelman, chief executive of Zillow.com, believes that people should consider giving up.

"I think there are a lot of people who don't walk away from their house for moral reasons that are economically irrational," he said.

Some experts believe that credit-evaluation companies will view foreclosures differently in this era. "This is a once-in-a-century real estate market. The question that FICO will be asking itself is, is a foreclosure in 2008 and 2009 the same as a foreclosure in 1998, 1999 or 2003 and 2004?" said Todd J. Zywicki, a bankruptcy expert at George Mason University School of Law in Arlington, Va.

Source: The Los Angeles Times, Alejandro Lazo (11/29/2009)