Underwater homeowners walk away to stay afloat
MIAMI - Bob and Julie Sistik's American dream is now in boxes after choosing to do what was once unthinkable - walking away from their mortgage. They paid $700,000 for their house in Miami in 2005 - a stretch for a firefighter and a secretary - but in the old superheated housing market, they qualified, CBS News correspondent Jim Axelrod reports.
They could afford the big mortgage for a few years until Bob got hurt on the job and was out of work. By the time they tried to sell, the house was worth less than half what they'd paid for it.
So a year ago, they stopped paying their mortgage. It's called "strategic default" - people with no hope of ever breaking even on their homes no longer try.
"I've totally failed," Bob said. "It's really difficult to not do what I said I was going to do."
No state is hit harder by the house crisis than Florida. Of 4.3 million mortgages here, 780,000 are in default; one in four of those are so-called "strategic defaults" - people choosing to walk away.
Foreclosure attorney Chae Dupont tells her clients that surprisingly it doesn't devastate their credit forever. They could recover in a few years.
"It's not totaled at all," Dupont said. "As long as you're paying all of your other credit on time, you should only expect about a 150-point hit on your credit score."
Another client, Victoria Wilkinson, hasn't paid her mortgage for nearly two years since her husband walked out. Because of the paperwork backlog, it could take the bank three years to foreclose.
Asked how she feels about people who say what she's doing is immoral, Wilkinson says: "It's not. I wanna do the right thing. But I also need to take care of myself and my son."
As for the Sistiks, they'll be moving in with family in North Carolina, heartbroken to leave their three grandchildren.
"We tried to do what's right," Julie said.
"It's a little hard to know what's right right now," Bob said.
With nearly one in four mortgage holders nationwide now underwater, it may be the best hope for some to stay afloat.
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