Comments on: FICO: Quantifying the Damage, How Short Sales May Impact Credit Scores http://www.behindthemortgage.com/2009/12/fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores.html?utm_source=rss&utm_medium=rss&utm_campaign=fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores Alex Stenback | Twin Cities Blog on Mortgages, Rates, and Real Estate Thu, 05 Jan 2012 22:38:40 +0000 hourly 1 http://wordpress.org/?v= By: Alex Stenback http://www.behindthemortgage.com/2009/12/fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores.html/comment-page-1#comment-21073 Alex Stenback Wed, 09 Dec 2009 17:43:08 +0000 http://behindthemortgage.com/behind_the_mortgage/2009/12/fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores.html#comment-21073 Totally depends on the circumstances. If they truly cannot afford the home, but are still employed and have income, I think many would at least attempt a short sale or a Modification before walking. Still, many others probably just walk. The walk-aways seem so be in two groups - those who could never and will never be able to afford the property long term, at any reasonable terms (this group includes speculators and stuck flippers as well as buyers who just were not paying proper attention and underestimated their risks) and those that can afford the home, but see how far upside down they are and essentially trade their credit score (and ability to finance real estate for a few years) for $100K. This is the problem (in many cases walking away is by far the most economically rational course) that has the banks in a terrifying puke-fest over continued declines in real estate values. Totally depends on the circumstances. If they truly cannot afford the home, but are still employed and have income, I think many would at least attempt a short sale or a Modification before walking.

Still, many others probably just walk. The walk-aways seem so be in two groups – those who could never and will never be able to afford the property long term, at any reasonable terms (this group includes speculators and stuck flippers as well as buyers who just were not paying proper attention and underestimated their risks) and those that can afford the home, but see how far upside down they are and essentially trade their credit score (and ability to finance real estate for a few years) for $100K.

This is the problem (in many cases walking away is by far the most economically rational course) that has the banks in a terrifying puke-fest over continued declines in real estate values.

]]> By: Chuck http://www.behindthemortgage.com/2009/12/fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores.html/comment-page-1#comment-21033 Chuck Wed, 09 Dec 2009 12:59:49 +0000 http://behindthemortgage.com/behind_the_mortgage/2009/12/fico-quantifying-the-damage-how-short-sales-may-impact-credit-scores.html#comment-21033 Alex - realistically, if someone with an 'exotic' loan (Interest-Only, Option ARM) is facing a huge payment increase, say $1400 to $3500 per month, are they going to attempt to preserve Credit Score, or walk-away from a loan that's far far too big for their income? ( I know a few well-off folks in Lake Harriet area who are in this position ) Alex – realistically, if someone with an ‘exotic’ loan (Interest-Only, Option ARM) is facing a huge payment increase, say $1400 to $3500 per month, are they going to attempt to preserve Credit Score, or walk-away from a loan that’s far far too big for their income?

( I know a few well-off folks in Lake Harriet area who are in this position )

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