Back-outs worsen mortgage woes

“It’s the people with interest-only and [adjustable-rate mortgages] who are really having a problem.”

Kevin O’Brien

Attorney

Fearing they may default on their loans, some are walking away from mortgages.

COLUMBUS (AP) — Experts say fretting homeowners who worry the mortgage market is worsening are, well, making the mortgage market worsen.

Fearing they might default on their loans, some are walking away from mortgages and cutting their losses — a move experts say only deepens the crisis. Even borrowers who are current with payments have said they have no choice but to anticipate foreclosure.

“My fear is that we haven’t seen the bottom of this, and if we don’t see the bottom of this for another two years, my home might be worth 120 [thousand dollars],” said Ralph Stover, a Columbus resident who bought a condo in 2003 for $170,000. “Then you start wondering: Am I throwing good money after bad?”

Fears of a faltering housing market have prompted some borrowers to simply walk away, driving down home values and forcing neighbors to deal with homes that, in some cases, aren’t worth as much as the loans.

“It would be devastating. It would just take the credit crisis and amplify it that much more,” said James Newton, chief economic adviser for Commerce National Bank in Columbus.

Some borrowers with flexible-rate mortgages recognize they are in for trouble.

“It’s the people with interest-only and [adjustable-rate mortgages] who are really having a problem,” said Kevin O’Brien, a Columbus attorney who represents banks in foreclosure cases. “Some of these people just get pushed off the financial cliff, and then you’re done.”

Stover, for instance, said he expects one of his two mortgage payments to double.

“If things continue to go the way they seem to be going, it’s going to be unaffordable,” Stover said. “I’m just not going to make it.”

Because housing values are going down, many homeowners like him cannot redo their loans because they already owe more than their home is worth.

“We’re just really beginning to see households coming forward that are afraid they’re going to be behind, but they aren’t really behind yet,” said Rebecca Hilbert, director of counseling for the Columbus Housing Partnership.

Single-family house prices peaked in 2005 and they keep dropping; at the end of last year, the median house price had dropped about 5 percentage points.