NEW YORK–Why do people who are underwater on their mortgages continue to make payments? Although the housing market is robust, more than two-million people still owe more on their mortgages than their homes are worth, according to recent data.
While many believe most homeowners choose to walk away in such situations, a new survey by the New York Fed offers some insights into what homeowners who are underwater are really thinking.
Underwater homeowners were asked, “Have you considered no longer making your monthly payments on loans against your home?” Nearly 87% said “no, absolutely not.” Another 6% said “yes, they had considered no longer making payments, yet none of them had done so, according to the Fed.
The Fed then asked, “Why didn’t you stop making payments?” The survey found (respondents could provide more than one answer):
- 77.6% said “I like my home and don’t want to lose it”
- 25.2% said “The cost of having to move to a different home is too high if I stop making payments”
- 19.1% said “Not making payments will negatively affect my credit score”
- 16.8% said “The lender can come after my other belongings if I stop making payments”
The survey found 11% of people who are underwater on their mortgage said they believe home prices will recover.