In some cases, an underwater homeowner may be a victim of circumstance. In a Washington Post Q&A, a man received a home through inheritance, and its value he claims was less than the mortgage. According to Ilyce Glink and Samuel J. Tamkin, the next action that should be taken is dependent on if the new owner’s name was on the title with their consent.
As fo Q3 2019, more homes are equity-rich than underwater, according to the Home Equity & Underwater Report from ATTOM Data Solutions. However, for those that receive an underwater home unexpectedly, simply allowing the home to go to foreclosure may be the best option.
“We doubt that your husband has any responsibility for the repayment of the debt, as the lender’s security is with the property,” said Tamkin and Glink. “This means that if the property is lost in foreclosure, your husband’s credit should not be hurt.”
This assumes the new owners name never made it to the tile, or did so fraudulently, in which case he/she will need to fight it. For servicers, the home will become the lender’s issue after foreclosure. Another option for the new owner, however, would be to sell, or simply give it to the lender flat out.
“In some situations, you might be able to sell the property to a buyer and hope that buyer pays enough to cover the loan and closing costs,” said Tamkin and Glink. “If the buyer is unable to offer enough, you might get the lender to approve the sale anyway as a short sale, where the proceeds of the sale are insufficient to pay off the debt and the lender allows the sale anyway.”
Despite this rare occurrence, many Americans are seeing themselves on the “on the right side of the balance sheet,” according to ATTOM Data Solutions.
“There are notable equity gaps between regions and market segments,” said Todd Teta, Chief Product Officer with ATTOM Data Solutions. “But as home values keep climbing, homeowners are seeing their equity building more and more, while those with properties still worth a lot less than their mortgages represent just a small segment of the market.”