As stated in an article last week there are some 87,000 active foreclosures in California, more than ½ of those are in Southern 
California alone. Did you know that a fair number of those are voluntary? Yes! That’s right there are actually people choosing to walk away from their homes and risk the dreaded foreclosure mark on their credit score. This is the most devastating thing to happen in some families lives. Most would choose anything other than foreclosure and yet there are people who are just deciding to do it. They are choosing to walk way from their homes, walking away from pools that were meticulously put in, yards carefully designed and landscaped, and mortgages that they just no longer want to pay.
Yep that’s right among the 87,377 active foreclosures in California are voluntary foreclosures. The exact number of voluntary foreclosures has not been reported but we do know that some homeowners are doing this as they have stated so in various interviews or polls but because most of these people want to remain anonymous there is no way to get an exact number. These people see that their homes have plummeted in value so their financial cushion of equity in their home is gone and yet they see homes just like theirs selling for ½ of what they currently owe and pay on their home. You need to know that these homeowners are not in default, have no hardship they just feel indignant that they are stuck with their high mortgage when others are getting the same house at a smaller, more affordable price.
This is part of the problem and solution for some. This housing crisis is a double edged sword. People who legitimately have hardships due to job loss, pay cuts, unforeseen medical issues/bills, on top of losing their equity in their homes end up facing foreclosure not by choice and sometimes forcefully. Thankfully there is hope for homeowners who had these legitimate hardships and Fannie Mae homeowners who opt to short sale their house to avoid foreclosure can get a new home loan in as little as 2 years and those who are foreclosed can get a loan again in 5 years much better than the old rule of 7-10 years!
The flip side to this is that the non-distressed homeowners still feel the sting of lost equity but can still make their mortgage payments and are frustrated with that. They aren’t in a sinking ship like the rest, but more stagnant in a bog as homes in California, especially the Inland Empire won’t be building much equity for at least a year and certainly won’t be anywhere near their values in 2005/2006 for 12-15 years experts say (and I agree). So that flip side is the non-distressed homeowners opting for foreclosure to dump the old mortgage and take advantage of the lower prices today and buy again. Some of these are called “buy and bail” strategies where they walk away from the higher mortgage before missed payments are on their credit report and they get a new home loan at a much lower price and interest rate for the same size house and buy a house that has a chance at building equity much faster.
Do I agree with this tactic? No, not really. But I do understand it. But I don’t recommend it, it could be viewed as mortgage fraud and could bite you later.