Can mortgage companysue us for walking away from a home we can no longer affordand cannot sell due to large balance?

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Can mortgage companysue us for walking away from a home we can no longer affordand cannot sell due to large balance?

We purchased a large tri-level home 8 years ago. We both worked and could easily afford the payments. We still owe a rather high balance but with the recession, the new appraised value of our home is much less than we owe. I am now on disability and no longer physically able to get around the home and must move to 1 level home. Can we legally walk away from this house and buy another small home without attachments on it from our current mortgage holder or legal repercussions?

Asked on February 16, 2012 under Real Estate Law, Missouri

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

No, you may NOT walk away rom the home without repercussions. The law, the promissory note, the mortgage, etc. do not care about your personal financial or employment situation. In financing your home, you contractually obligated  yourselves to repay the loan. If you stop paying it, the lender may foreclose; if the home, when sold (e.g. at a foreclosure auction) brings in less than is required to pay the remaining balance of the home, the lender may be able to sue you for the unpaid amount. You will also suffer a significant hit to your credit rating, from the default. Finally, note the lender does not have to take the home back or foreclose open it; it has the right to refuse to accept it, which means you will remain the owner and will be responsible for its upkeep, taxes, utilities, etc. If the lender does this, it will still be able to sue you for the money you owe under the loan.

You write that the home is worth less than the balance; in the situation, there is no reason to assume that the lender will accept losing money and will not come after you, in some way or form.


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