I saw another facet of the underwater home mortgage when my client was considering whether to cure the mortgage arrears or walk away.  If he cannot hang on to the property until it regains the $85,000 negative, he will not be able to sell the property in the future without the active cooperation of the lender for a short sale.  After our current experiences with lenders and underwater properties, who wants to bank on that?

The homeowner was a single man and the property was a one bedroom one bath condo.  Life wouldn’t have to change much before a 1 and 1 is too small for a married man.  He’s filing bankruptcy now and will take the credit hit and get on the way to a fresh start.

If he elects to keep the condo and cure the arrears, he sets himself up for another possible credit hit when he needs to sell a property still underwater.