Delinquent Homeowners

Not paying can give troubled borrowers a chance to get back on solid financial ground. "I say take advantage and save $20,000, $30,000, $40,000 or more in order to go live somewhere else, or buy a house outright," says Stopa, whose law offices are in Tampa. He says that despite homeowners' clamoring for help, many banks never provided any. Now, he says, "homeowners are doing what is in their own best interest."

Bankers say the cost of living for free will ultimately result in higher interest rates shouldered by people who had nothing to do with these delinquencies. "It will be factored into all mortgages so future borrowers will be paying more," says Bob Davis, executive vice president at the American Bankers Association.

Delinquent borrowers say they have few options. They cite job loss, collapsed real estate values and subprime mortgages that reset to unaffordable heights.

Martinez, 58, says he would happily trade places with a working, paying homeowner. "I don't like how I'm living. It's embarrassing to me," says Martinez, who lost his job six years ago and fell behind on his mortgage. The bank demanded a $7,000 payment. He offered $3,500; the bank wanted the entire amount.

"What was I supposed to do? If I could strike a deal with my lender, I would," says Martinez. "People who feel it's unfair, they're entitled to their opinion, but they should make sure they have the facts before they make a judgment."

Borrowers like Martinez face serious consequences that could last for years. Bank-imposed fees, interest and fines covering the time the home goes unpaid continue to drive up the mortgage principal. Moreover, once a foreclosure goes through, banks can file suit for the balance unless there's been a negotiated settlement.

Meanwhile, the borrower's credit score nosedives, making it difficult to get future financing for a home, car or any other big-ticket item.

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