Upside Down? Stop Paying Your Mortgage Today

[Photoguy]

Actually if your house is worth less than what you owe, you absolutely should stop paying on your mortgage. It will be a year before the bank tries to kick you out and by then the whole economy will be very different. Keep your savings in a safe place, not a bank.

I love how these kinds of educated guesses allow people to paint their particular brand of belief over the canvas of reality and somehow justify their own unsupported version of The Truth.

Whatever.

So this means I don't have to pay my mortgage payment any more, right? Nope. Not right. Reality is still reality, cool visions of and novel interpretations of reality don't change the fact that I'm hungry and need some food or that I'm poor and need some money or that I'm horny and want some sex. Know what I mean?

I'm glad there are visionaries and scientists out there who have the time and money to ponder such things. Perhaps this "discovery" will allow travel to the stars some day. In the meantime, I'll fix myself some toast and coffee.

-Jeff

[Braggi]

Actually if your house is worth less than what you owe, you absolutely should stop paying on your mortgage. It will be a year before the bank tries to kick you out and by then the whole economy will be very different. Keep your savings in a safe place, not a bank.

Wow. Photoguy, first off, banks are safe. If your savings are FDIC insured, you're cool. Not many reading this have accounts in any single bank in excess of $100,000. Maybe you do and that's why you offer this warning.

I'm in the privileged position of having far more in equity than my mortgage balance, so I'll keep paying, thank you.

Unless you have no credit rating worth having, you should keep paying on your mortgage even if you're "under water." We all committed to a dollar value when we signed on the bottom line. If things have changed and you want to take that up with your bank, good luck. Some people have been able to reduce their principle, but only a very few. Odds are against it.

One thing people can do without too terribly much trouble is sell your under water property using a "short sale" in which the bank takes on the reduction in value. I had to do that route when I sold my house in Dana Point for $85,000 less than I paid for it after Papa Bush trashed the Orange County economy. But don't stop making payments unless you already have a zero credit rating.

Holographic property values. Hmmmm.

-Jeff

[Photoguy]

I am hoping to start a thread that will get people to really think about what is happening, take a real look at their assets, or lack of them, and make a plan that is realistic.

If you are upside down in your mortgage, or you have less than 20%( a very conservative number) equity over the potential sale price of your home you need to stop your mortgage payments today! Here's why. No economist or politician disagrees that no matter what is done the economy will continue to slide for at least the next year. Housing values will continue to drop, actually picking up speed in their fall over a minimum of the next year. When the recovery starts, a minimum of 5 years will be needed to come back to where we are today.

If you stop paying you will end up in default and eventually will be evicted from your home, however, right now this process takes a minimum of 9 months to proceed. The congress will eventually pass a bill to allow bankruptcy judges to reset loans on homes. That means you will have to be in bankruptcy in order to get your home revalued at a fair market price. This bill will pass in the next few months. You will need a minimum of $3000 to pay your bankruptcy attorney, up front, to start this process. If you save the money you don't spend you can quickly grow a war chest for your financial fight.

If you are paying the typical $1500 to $3000 a month to your mortgage that means you will have $15,000 to $30,000 for your needs at the end of a year. As financial companies and banks continue to fail you can be pretty much guaranteed another year in your house. If your home insurance is being paid as part of your mortgage, take it out of the mortgage and pay it separately. Things are going south quickly, there is no moral obligation on anyone's part to keep the present system functioning! The deregulation and greed on the part of financial institutions are 100% responsible for this mess. Not you, to keep paying the criminals that caused this is far more morally objectionable than empowering them.

No matter what, NEVER USE SECURED DEBT (YOUR HOUSE/PROPERTY) TO FINANCE OR REPAY UNSECURED DEBT(YOUR CREDIT CARDS) !!! If you stop paying your credit card debt, and then destroy them all, all they can do is get a judgment against you. You will need these judgments for your bankruptcy to proceed.
BUT MY CREDIT WILL BE RUINED! So what. When the credit rating system comes back to reality, if you owe more than you can repay your credit will be ruined, even if you have made every payment on time! So you have a job, are making payments into a system that you can never repay in your lifetime(LISTEN UP YOU BABY BOOMERS) YOU WILL HAVE BAD CREDIT. The credit reports that landlords and financial institutions are using now will be worthless. The reality is that most people already have very bad credit if they have outstanding balances on their credit cards and are upside down on their loans, regardless of your credit score. Nothing you can do will stop your credit from being severely downgraded. The sooner you get yourself into bankruptcy, the sooner you can come out the other side of this in tact.

Do not refinance or modify your loan. It is a trap and a lie. The people doing these are the same scum that caused this in the first place. You will owe more on a home that is loosing value and end up defaulting anyway. Right now more than 60% of all home loans that have been modified are in default anyway. The people who wrote the loan get to keep the $10,000 they pulled out of the deal. You have spent a bunch more money and are still going to get evicted if you can't afford bankruptcy.

[Photoguy]

Sorry, I can't help myself. If your bank is also your mortgage lender, they can legally seize your accounts for payment on your mortgage. If you can do a cram down, good for you. 95% are rejected out of hand.

[Braggi]

... are still going to get evicted if you can't afford bankruptcy.

When you got nuthin', you got nuthin' to lose.

Some of us still have something to lose.

I wouldn't follow this plan without consulting a good bankruptcy attorney first. You're going to need one.

-Jeff

[Photoguy]

You're right Jeff. A good bankruptcy attorney will be needed. However the advice I gave is not advice they can give. They can not recommend anything that is not fully legal. I do not say you should charge a bunch of stuff then do this, that would be wrong. If you are a person who has gotten into trouble because of over borrowing against your house and using credit cards to augment your grocery,medical and car bills etc. the post is for you. I think really many people still making payments actually have nothin' to loose, they just don't know it yet.

[MsTerry]

Wow. Photoguy, first off, banks are safe.
-Jeff

Have you read the news today? (johnpaulgeorgeringo)

Stocks tumble after gov't unveils financial plan

By TIM PARADIS, AP Business Writer Tim Paradis, Ap Business Writer 19 mins ago
NEW YORK – Investors are frustrated with the government's latest bank bailout plan — and showing it by unloading stocks.
The major stock indexes fell more than 4 percent Tuesday, including the Dow Jones industrial average, which tumbled 382 points. Financial stocks led the market lower, a sign of how concerned Wall Street is about the government's ability to restore the health of the banking industry.
Traders and investors said the lack of specifics from Treasury Secretary Timothy Geithner on how the government will direct more than $1 trillion in public and private support was troubling.
The plan is aimed at restoring proper functioning to credit markets, which seized up over worries about bad debt after the September bankruptcy of Lehman Brothers Holdings Inc. The latest plan calls for a government-private sector partnership to help remove banks' soured assets from their books. It would also boost an effort to unclog the credit markets that govern loans to consumers and businesses.
"The good news is they are going to spend a trillion dollars, the bad news is they don't know how," said James Cox, managing partner at Harris Financial Group.
"They built this up as being a panacea," he said. "There was so much hope pinned on them to do a good job. The expectations have been so high. It's hard to live up to."
Investors also questioned whether this plan, which followed previous efforts in the final months of 2008, would work. Some selling was to be expected, however, as stocks rose sharply last week ahead of the announcement.
Geithner's speech "basically puts a spotlight on the fact that the government has no idea how to fix the problem," said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants. "People bought on rumor and hope, and now they're selling on reality."
Investors focused on the financial rescue showed little reaction to the Senate's approval of its $838 billion economic stimulus package. The bill must now be reconciled with an $819 billion version passed by the House. Congressional leaders hope to have the bill on President Barack Obama's desk before a recess next week.
"The economy is in deep trouble. The stimulus plan is not very stimulative. It's not addressing the real problem," Buetow said. "We have an insolvent financial system. The government is trying to find a comprehensive way to save it. They can't afford to just throw money at it. That's what they tried to do in the fall and that clearly did not work."
Stocks extended their slide after Federal Reserve Chairman Ben Bernanke didn't elaborate on the plan in testimony at a House Financial Services Committee hearing. Instead, Bernanke said the programs designed to revive the credit markets are showing promise and that any fix to the worst financial crisis since the 1930s would take time to work.
According to preliminary calculations, the Dow industrials fell 381.99, or 4.62 percent, to 7,888.88. It was the lowest close since Nov. 20, when the blue chips finished at their lowest level since March 2003.
Broader stock indicators also tumbled. The Standard & Poor's 500 index fell 42.73, or 4.91 percent, to 827.16, and the Nasdaq fell 66.83, or 4.20 percent, to 1,524.73.
The Russell 2000 index of smaller companies fell 22.17, or 4.74 percent, to 445.77.
Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares.
Bond prices jumped as investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.83 percent from 2.99 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.31 percent from 0.32 percent late Monday.
The dollar rose against other major currencies. Gold prices also rose.
Light, sweet crude fell $2.01 to settle at $37.55 a barrel on the New York Mercantile Exchange.
Peter Jankovskis, co-chief investment officer at OakBrook Investments, said the government's plan doesn't resolve the question of how much the troubled assets weighing down banks' books are worth. By providing funds to purchase the assets or by buying them outright the government risks hurting banks by paying too little or hurting tax payers by paying too much.
"Valuation is the fundamental issue," Jankovskis said.
Scott Valentin, an analyst at Friedman, Billings, Ramsey & Co. said the government might be playing politics by not proposing measures that would touch off great debate in Washington and meet with public approval. A government takeover of a bank, for example, wouldn't be politically palatable, he said.
"There are some people that believe the government is dancing around the issue of what has to be done and what is politically acceptable," he said.
Valentin also said some of the drop in stocks could be hastened by short sellers — investors who place bets that a stock will fall.
Short sellers last week snapped up shares of financial stocks to cover their bets in case Geithner's announcement sent stocks higher. Now, those investors can put their pessimistic bets back in place. This can weigh on the price of a stock and exacerbate selling.
Investors are simply left with many questions.
"I think generally we just don't know enough. We just don't know enough of what it all means," said Jon Biele, head of capital markets at Cowen & Co. "It's digestion time."
Most other news only added to investors' worries. The government reported that wholesalers cut back on their inventories in December by the largest amount in 16 years. The reduction means wholesalers ordered fewer new goods, leading to reduced production and potentially more job losses.
The Commerce Department said wholesale inventories plunged by 1.4 percent, nearly double analysts' expectations of 0.8 percent. It also was the fourth straight monthly decline.
Bank stocks saw the biggest selling. Bank of America Corp. fell $1.33, or 19.3 percent, to $5.56, while Wells Fargo & Co. fell $2.71, or 14.2 percent, to $16.35.
Regional banks also showed big drops. Fifth Third Bancorp fell 70 cents, or 24 percent, to $2.19, while Huntington Bancshares Inc. fell 65 cents, or 25 percent, to $1.96. Conglomerate General Electric Co., which has a big finance arm and often trades like a bank stock, fell $1.02, or 8.1 percent, to $11.62.
Principal Financial Group Inc. fell $5.04, or 30 percent, to $11.99 after the insurer posted a fourth-quarter loss on investment and loan losses. The company's report raised fears that the company will be forced to raise cash.
More downbeat corporate news served as unnecessary reminders of just how bad the economic situation remains.
Alcoa Inc. fell 85 cents, or 10 percent, to $7.65 after a ratings agency slashed the aluminum producer's corporate credit rating. Standard & Poor's Ratings Services said it expected the company's credit metrics to deteriorate significantly this year.
General Motors Corp. said it will cut 10,000 salaried jobs in 2009, as part of the restructuring plan the company submitted to Congress late last year. GM fell 13 cents, or 4.6 percent, to $2.70.
Overseas, Britain's FTSE 100 fell 2.19 percent, Germany's DAX index fell 3.46 percent, and France's CAC-40 fell 3.64 percent. Japan's Nikkei stock average fell 0.29 percent.

[Braggi]

Have you read the news today? (johnpaulgeorgeringo)

Is there something I missed? Besides The Beatles? (I do miss them.)

-Jeff

[Photoguy]

I really only miss John. YouTube - Jhon Lennon - Imagine

Is there something I missed? Besides The Beatles? (I do miss them.)

-Jeff

[mykil]

Let us do a few quick calculations shall we. About three billion computers have been sold in the last ten years, starting at 1500 and now averaging five. Average is probably about a grand each which that 100 trillion bucks. Five billion cell phones at a hundred plus subscriptions billion just in the phone internet satellite connections cell towers. GAWD we are talking in the neighborhood of hell what is after trillion again? Anywayz lets just say 999 trillion bucks out there roaming free! I have been thinking of the numbers for the last few dayz and was wondering why? It is probably closer to five hundred trillion dollars world wide in just ten years that the computer industry has produced in product that HAS sold. Where is all this money? A new theory might be they really had to do something to bring us back to reality. I think this was all siphoned off for a reason! WHAT WAS THE REASON???? This was new money that is now gone, gone where???

I have my own theories now lets here your!

A house I was looking at buying ten years ago was 60k. This peeked at 350k just a few years back; you can buy the same house for 100k. I am thinking this is where this particular house should actually be. Over ten years it really should have increased this much. What are you thoughts on this?

WE should have plenty of this money lying around, instead it is all gone. This was new money, what I mean is it was made, manufactured from a new source. Why is all this new money gone? Who has this new 500 trillion dollars? This cannot be just the rich siphoning this money off the top. This has to be a wide and vast conspiracy to bring us back into reality of what we should be. But who decided we had too much money in the first place?

Just a few rambling thoughts on this subject for you to jump all over and tell me what you think! P~E~A~C~E

Oh and my name is George John Paul but my friends call me RINGO!
HA!made that one up myself!

[Photoguy]

Good one! The money that was created by the housing boom only ever existed in theory. As loans based on believed value increased, banks trusted that value as if it was issued money from the Fed. That's part of the reason we can just print so much money right now without crashing the dollar or causing hyper inflation/deflation. So bank A claims eleventybillion in assets based on property it has the loans on, then knowing they have that still imaginary money they make loans to businesses and people who in turn acquire more value-less land and buildings for more money. When a bank gives a loan, generally no one gets any cash, it's just an agreement between financial institutions to accept credit, both plus and minus, from other financial institutions, giving each other lavish raises, bonuses and perks based on the mind money. Then one day someone says "wait a minute I can't sell my property for what I owe", then suddendly everyone pulls their head out of each others asses and realizes mistakes were made and that accepted credit agreements are not really worth what we thought. Then the credit market collapsed becuase it was based on only mind money, not money from any mint/reserve.
As far as housing values go there is a real simple way to look at them. No one should spend more than 30% of their actual income on housing costs. To spend more means you wont have savings, a college fund, be able to take time away from work or be able to afford other quality of life items. OK take the median income of an area, take 30% of that and that is what the payments should be on a median priced home in that area. Any more then you make the whole downward credit spiral the dominant theme of the economy.
This speaks to the rediculous amount of square feet people use to live in. Many houses for 2 could easily house 4 with comfort and room to spare. This means 30% of two families income could afford a nice lifestyle for 2 families that could live in close proximity of each other. These people could save for schooling, travel and other quality of life things.

Let us do a few quick calculations shall we. About three billion computers have been sold in the last ten years, starting at 1500 and now averaging five. Average is probably about a grand each which that 100 trillion bucks. Five billion cell phones at a hundred plus subscriptions billion just in the phone internet satellite connections cell towers. GAWD we are talking in the neighborhood of hell what is after trillion again? Anywayz lets just say 999 trillion bucks out there roaming free! I have been thinking of the numbers for the last few dayz and was wondering why? It is probably closer to five hundred trillion dollars world wide in just ten years that the computer industry has produced in product that HAS sold. Where is all this money? A new theory might be they really had to do something to bring us back to reality. I think this was all siphoned off for a reason! WHAT WAS THE REASON???? This was new money that is now gone, gone where???

I have my own theories now lets here your!

A house I was looking at buying ten years ago was 60k. This peeked at 350k just a few years back; you can buy the same house for 100k. I am thinking this is where this particular house should actually be. Over ten years it really should have increased this much. What are you thoughts on this?

WE should have plenty of this money lying around, instead it is all gone. This was new money, what I mean is it was made, manufactured from a new source. Why is all this new money gone? Who has this new 500 trillion dollars? This cannot be just the rich siphoning this money off the top. This has to be a wide and vast conspiracy to bring us back into reality of what we should be. But who decided we had too much money in the first place?

Just a few rambling thoughts on this subject for you to jump all over and tell me what you think! P~E~A~C~E

Oh and my name is George John Paul but my friends call me RINGO!
HA!made that one up myself!

[lawyerkelly]

The banks are not "safe" and more are becoming insolvent every month.

Here is an interesting article that discusses financial giant JP Morgan in particular, but the Banks in general and just how under capitalized and insolvent the world-wide banking system really is (copy and paste into your browser if the link doesn't work):

www.seekingalpha.com/article/119416-i-doubt-jp-morgan-s-taking-realistic-marks-on-wamu-purchase

The author also supports his positions with extensive research and interesting charts.

If anyone reading this does not have minimum of 3-7 days worth of cash in a safe place (not a bank) for when their ATM/Debit card no longer works, or they find the bank doors are locked and the Feds pouring over the accounts, they will wish they took the warning signs more seriously. Just like we should have extra water, blankets, food, batteries and flashlights handy for an earthquake or when driving to the snow, we now need to have access to at least a week's worth of living expenses in cash until the FDIC swoops in to the rescue.

I'm trying to figure out how Californian's will be able to use their State Tax Refund I.O.U. to put gas in their car to get to work so they can work as hard as they can to stay off the next lay-off list, so they can continue to put food on the table and keep a roof over their head; let alone pay unsecured debts like credit card payments. Perhaps Vegas or the California Lottery will take the IOU's?

[Photoguy]

I think you are right, but too understated. When the real wave of failures start hitting, the FDIC will be flooded. Sure, eventually you will get your up to $250,000 out, assuming anyone still has money like that in a bank. It could take as long as a month or two if accompanied by social disruptions. Like I said before, if you are withholding mortgage payments, your lender can confiscate your account without court order if they are the same as your banker. Very soon there will only be 2 or 3 banks, so no matter where your loan is and who your bank is, the odds are they will be the same institution soon.

[theindependenteye]

>>However the advice I gave is not advice they can give. They can not recommend anything that is not fully legal. I do not say you should charge a bunch of stuff then do this, that would be wrong. If you are a person who has gotten into trouble because of over borrowing against your house and using credit cards to augment your grocery,medical and car bills etc. the post is for you.

I'm not sure I understand the ethical distinction between what you acknowledge to be wrong and what you advise. In either case, isn't someone left holding the bag because someone spent more than he could afford?

I understand that keeping a roof over your family's head is a powerful motive force, and I myself could point to instances where I've rationalized my own less-than-virtuous behavior. But nevertheless it seems unethical to take someone's money or goods or services upon the promise of payment and then find clever ways to avoid paying for them. Should we, as a society, allow contracts to be broken at will? Or is that question just naive beyond belief?

I am, I think, a very tolerant, very liberal, non-materialistic guy, except where it comes to the issue of keeping your word. There are times when contract-breaking (divorce, default, bankruptcy, even war) may be absolutely essential. But the human being has an extraordinary talent for rationalizing that his personal status leaves no other option than to renege on past agreements. And so I tend to bridle when ethical considerations are given a brief pat on the butt and sent off to bed.

Just my opinion - nothing personal.

Peace & joy & hopes for reasonable prosperity—
Conrad

[Photoguy]

The masters of the universe who gave themselves 20 million dollar bonuses for extending credit that they knew would never be repaid thank you for your support.

[Photoguy]

Actually, now that the coffee is kicking in, you, I and everyone else borrowed money based on the belief that there was some regulation in the system and the value of the money borrowed would be relatively maintained. Don't forget the billions of dollars spent by the lenders on psychological profiling, marketing and lobbyists. The lenders were conducting a fraudulent business, and they knew it! Why do you think so many senior republicans left office over the last few years. They knew this was coming, took the money and ran! The moral breach was on the lenders part period! Now all any of us can do is protect ourselves from the damage they caused. Housing prices will drop at least as much more as they already have dropped regardless of what any individual does. The bankers are on Cspan right now getting grilled about this. You have fallen into their trap and are helping them with propaganda with your opinion. If you are looking at this from a moral perspective, then your view seems to support that if you are a victim of a ponzi scheme that requires payments from you, it's your fault and you are responsible to all the other victims of the scheme to keep paying so they don't loose what they have in the fraudulent scheme too.

>>However the advice I gave is not advice they can give. They can not recommend anything that is not fully legal. I do not say you should charge a bunch of stuff then do this, that would be wrong. If you are a person who has gotten into trouble because of over borrowing against your house and using credit cards to augment your grocery,medical and car bills etc. the post is for you.

I'm not sure I understand the ethical distinction between what you acknowledge to be wrong and what you advise. In either case, isn't someone left holding the bag because someone spent more than he could afford?

I understand that keeping a roof over your family's head is a powerful motive force, and I myself could point to instances where I've rationalized my own less-than-virtuous behavior. But nevertheless it seems unethical to take someone's money or goods or services upon the promise of payment and then find clever ways to avoid paying for them. Should we, as a society, allow contracts to be broken at will? Or is that question just naive beyond belief?

I am, I think, a very tolerant, very liberal, non-materialistic guy, except where it comes to the issue of keeping your word. There are times when contract-breaking (divorce, default, bankruptcy, even war) may be absolutely essential. But the human being has an extraordinary talent for rationalizing that his personal status leaves no other option than to renege on past agreements. And so I tend to bridle when ethical considerations are given a brief pat on the butt and sent off to bed.

Just my opinion - nothing personal.

Peace & joy & hopes for reasonable prosperity—
Conrad

[Photoguy]

Thank You Chazling. I have received some disturbing emails from people who think I am a-moral or worse. Conrad made points which are somewhat valid even though I see his opinion as aiding the enemy. Americans in general are willing to work hard and play fair. Statistics show that people are staying in their home or trying to pay off accumulated debts for an average of 2 years beyond the point at which they are inextricably under-water. They feel obligated to repay what they owe, and I agree, unless you are the victim of fraud. The "clean hands" principal. There was a time when if you needed hardware or groceries you would be in debt to your local retailer in his or her locally owned store. That kind of debt is direct and non-usurious. The only way to stop the banks, who are also the credit card companies, is to just stop paying, remove your money from their A-moral operations and reconsider your choices. The system is broken, but we(America) is going to spend trillions of dollars to slow the collapse to make it easyer. If we all just stop participating a new, actually the old, sytem will emerge of localized debt and communities which are bound together by more than geographic location. I have a lot more to say, but it's time to walk the dogs.
PLEASE START LOOKING AT WHAT IS AND MAKE PLANS BASED ON SOMETHING OTHER THAN BANKERS LIES.

I have to agree with Photoguy here;

There is a slow but sure, underground movement to resist caving in to the bankers on foreclosures of your personal home.
There are numerous references popping up around the country that show folks are starting to educate, organize and resist massive foreclosures on their home.

Dangerous, radical, populist, revolutionary ideas.
Imagine people waking up and really voting with their dollars,
(which is about the only true vote you have left anyway).
How will you vote on this new capitalist model we have now?:
unlimited short-term profiteering on the upside, but socialist taxpayer bailout for the down side when their over-leveraged ponzi scheme Trillion $ bet
falls apart. (only for the biggest and most well connected on Wall St. though.)

Here is a very sober, middle of the road article from BusinessWeek,
detailing the Foreclosure crisis, and "How the banking industry is undermining efforts to keep people in their houses".
Reflects directly on we can see coming out of the current banking bailout and stimulus bills being readied in Washington.

How Banks Are Worsening the Foreclosure Crisis - BusinessWeek

Make your own conclusions.......

[Zeno Swijtink]

https://www.nytimes.com/2009/03/14/y...s/14money.html

March 14, 2009
YOUR MONEY
Thoughts on Walking Away From Your Home Loan
By RON LIEBER

If you’re among the millions of people who will not qualify for the Obama administration’s program to help troubled homeowners, you’re probably wondering what you’re supposed to do now.

Perhaps you no longer have enough income to pay your loans. Or you can afford the payments but don’t qualify for refinancing under the new plan because the value of your home is too far below the balance of the loan. If you’re far enough underwater, you’re probably questioning the wisdom of writing a monthly check on a place that may take 10 or 15 years to get back to the value it had two or three years ago. It isn’t easy to come up with the answer, and if you have moral misgivings about not making good on your mortgage, a religious officiant may offer as much useful guidance as a financial planner.

In an economic environment like this one, however, the consequences of giving up on your mortgage may not be as painful as they were a few years ago. Yes, it’s almost always preferable to negotiate a better deal on your existing mortgage than to walk away. But if you can’t work things out with your lender, you probably won’t be sued. You shouldn’t receive a major tax bill either. And the damage to your credit will not be permanent or insurmountable.

Let’s look at these last three in order.

YOUR LENDER First off, let’s define what we mean by “giving up” on your current mortgage. It may mean trying for a short sale, where the lender allows you to sell your home for less than the mortgage amount. You may also hand over the deed to the home in exchange for the lender agreeing not to start foreclosure proceedings (a “deed in lieu” in industry terms). Then, there’s foreclosure itself, and the possibility that bankruptcy judges may soon have the power to adjust the terms of primary mortgages.

That said, just because you’re ineligible under the Obama plan doesn’t mean that your lender or servicer won’t ultimately adjust your mortgage anyhow. Collectively, there are enough people in trouble or under water on their loans that they have plenty of leverage if they’re willing to play chicken with their lender and threaten to stop paying.

The problem is, the lender can play chicken, too, by threatening to come after you for the balance of any money you owe — whether it’s the difference between what you sell the property for yourself and the remaining mortgage, or the loan amount left over after the lender sells your property in foreclosure.

The lender may not follow through, though. “What our membership is telling us is that it can be cost-prohibitive to chase down a borrower who is already in financial distress,” said John Mechem, a spokesman for the Mortgage Bankers Association. “You can’t squeeze blood from a stone.” They may, however, still come after people with high incomes who walk away from jumbo loans that are way under water or loans on investment properties.

Some states have laws that may specifically prohibit lenders from pursuing borrowers for the balance of many mortgage loans after foreclosure, though the particulars vary. Arizona and California are among these states, according to Steven Bender, a professor at the University of Oregon School of Law. It’s best to talk to a lawyer to determine your state’s rules.

In fact, if you want to be sure your lender (or a collection agency that it may sell your loan to) won’t chase you down, it’s a good idea to have a lawyer involved with any short sale, deed in lieu or foreclosure itself. “You must get the bank to agree in writing that any deficiency is waived,” said Chip Parker, a lawyer specializing in foreclosure with Parker & DuFresne in Jacksonville, Fla.

The biggest challenge here may simply be finding someone at the bank to help. Having a second mortgage will also complicate matters.

YOUR TAXES You also need to consider the taxman. Often, forgiven debts are taxable as income. Recent legislative changes, however, eliminate the federal tax burden through 2012 on most primary residence debt that a lender has reduced through loan restructuring or forgiven during foreclosure.

Mark Luscombe, principal analyst for CCH, a tax information service, said that people who sell their home through a short sale or give up the deed in lieu of foreclosure can also qualify for tax relief if they use a special tax form, 1099-C, that reflects the amount of debt that the lender has forgiven.

People who live in states with their own income taxes may avoid a big bill as well. Some states, like Arizona and California, have introduced or passed legislation that echoes the federal laws, according to the National Conference of State Legislatures. Many others tend to mimic most or all federal income tax laws as a general rule, according to CCH. Check with an accountant in your state to be sure.

YOUR CREDIT A short sale, deed in lieu or foreclosure itself will almost certainly damage your credit report and score, and the black mark will last for up to seven years. But the amount of damage it does will depend on how much other credit trouble you’ve gotten yourself into with other lenders.

If you’re giving up the home you own, you’ll probably need to rent soon afterward. Will landlords turn you away once they check your credit and discover your troubled mortgage? “If it’s the only thing marring their credit, it’s probably not a big issue,” said Clay Powell, the director of the Rental Property Owners Association of Michigan, who added that good tenants could be scarce in economic environments like this one.

In fact, Todd J. Zywicki, a law professor at George Mason University, predicted that FICO may have to adjust its credit scores to lessen the impact of a foreclosure or similar incident. “It just seems obvious that a foreclosure in 2008 or 2009 doesn’t have as much information value as a foreclosure five years ago,” he said. “To the extent that foreclosure doesn’t predict future behavior as much as it did in the past, you’d expect that the FICO algorithm would change to adjust for that.”

Craig Watts, a spokesman for FICO, said that was an interesting idea. “We try not to get involved too much in psychobabble around what is and isn’t predictive,” he said. “If the numbers show that foreclosure is less predictive, then we’ll take it into account in future redevelopments of the formula.” That would take a minimum of two to three years, though.

Some lenders aren’t waiting that long to initiate their own foreclosure destigmatization programs. The Golden 1, one of the nation’s largest credit unions, now has a mortgage repair loan for people who have lost a home to foreclosure but want to buy a new one.

It’s hard to imagine that there won’t be a parade of insurance companies, credit card issuers and mortgage lenders in Golden 1’s wake, even though Fannie Mae and Freddie Mac may be unwilling to guarantee the mortgages of such borrowers for several years. In fact, Aaron Bresko, the vice president of lending for BECU, another large credit union based in Washington State, is putting together a panel called “How to Lend to the Newly Credit Impaired” for a conference later this year.

“Good people have bad things happen to them, so how do you find those people and reach out to them?” he said. “As the year progresses, it’s going to be an emerging market.”

How are you handling your mortgage problems?

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