‘Underwater’ Homeowners Say They Honor Mortgages

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NEW YORK (MainStreet) — A new study by Wells Fargo (Stock Quote: WFC) suggests that Americans, though rattled by dwindling home values, still believe making their mortgage payments is the right thing to do, even if their homes are flirting with underwater status.

At least Wells Fargo is making an effort to be more transparent about the problems many Americans are having making their mortgage payments. Since 2009, the bank has modified about 650,000 mortgages, and to its credit publishes its track record on loan modifications every month on its website.

This study seems to be part of that increased transparency at Wells Fargo, although there is an emphasis on holding homeowners accountable for their end of the mortgage bargain. Survey respondents were asked whether they agreed with the statement: "A contract is a contract and people should be held responsible for paying their mortgage based on the terms they agreed to with the bank."

By a wide margin, respondents took the high road: 57% said they agree with the statement, 11% disagreed, and 30% had no opinion. The results are a good sign for housing market stability

“While it's difficult to see in today's complexity, consumers' sense of obligation to the mortgage contract has not gone away," says Lisa Zakrajsek, head of marketing at Wells Fargo, in a speech at the SourceMedia Mortgage Servicing Conference in Dallas last week.

Surprisingly, 51% of homeowners whose homes are underwater (properties whose value has sunk lower than the amount of the mortgage loan) agreed that if they had a contract then that contract should be honored (even if they couldn’t afford to pay their mortgage).

That’s a real eye-opener because most of the talk about the ethics of paying a mortgage (or not) in recent years has focused on “strategic defaults,” or the act of walking away from your home mortgage if you owe more on the home than its assessed value.

A 2010 study by Lender Processing Services backs that up, saying that the average homeowner in foreclosure hasn’t paid his or her mortgage in 507 days, representing almost a year and a half of free rent.

But the Wells Fargo study stands that argument on its head. Nowadays, there is less talk of popping your keys into the mailbox and walking away from your home and more talk of personal accountability. As more Americans fight to stay in their homes and keep making payments, that not only helps their credit scores but also helps stabilize their neighborhoods and communities.

As Zakrajsek asks, "Has our moral fiber decreased as a result of this crisis? I would say the answer is no."

That “no” is a great testament to troubled U.S. homeowners, who are showing more moral backbone than many of the banks that went running to the U.S. Treasury for bailout money when things went south for them back in 2008 and 2009.

There aren’t any bailouts for underwater homeowners, but it seems that they’re standing tall anyway.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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