Gold ATM Machine Debuts in Abu Dhabi

As economic fears drive gold prices to new highs, the creator of a gold-dispensing ATM is attracting attention around the globe.

Germany-based GOLD to go, which is currently churning out 50 gold machines a month to meet a recent jump in demand, launched its first ATM in Abu Dhabi's Emirates Palace Hotel earlier this month and opened its second in Germany last week.

The golden ATM's next destinations are the Bergamo Airport in Milan, Italy, all major airports in Malaysia, one of Russia's biggest banks and an undetermined location in Turkey.

By making gold investing as easy as buying a candy bar from a vending machine, GOLD to go hopes to attract average buyers to the gold market.

"We are going to make gold public with these machines," said Thomas Geissler, CEO of Ex Oriente Lux AG, which owns GOLD to go. "The prices are so easy to control that we're going to de-mystify gold and make it easier for anyone to buy it."

GOLD to go's ATM looks like a vending machine and dispenses gold coins and bars weighing up to one ounce at prices updated every 10 minutes based on the real-time spot price of gold.

ATM-owners can choose from a variety of other gold items, such as gold Canadian maple leaf coins, South African Krugerrands, and even some custom designs. For example, the special edition gold medallion it engraved with the Palace Hotel's logo was created for the United Arab Emirate debut.

See the gold-vending machine in action

Earlier this month, gold prices hit an all time high of nearly $1,250 per ounce, and the precious metal has continued to climb as euro zone countries struggle with debt and investors worry that the region's problems could spread globally.

Until this uncertainty in the market eases, the demand for gold will only grow, said Carlos Sanchez, a precious metals analyst at CPM Group.

"[The ATM] is just a reflection of the demand from consumers and investors for exposure to gold," he said. "As long as prices continue to trend upward and investors remain concerned over economic and political conditions, I think we'll keep seeing strong demand for safe-haven assets like gold."

Next stop, Italy: Patrizio Locatelli, owner of SE 6, a small company in Italy that pays customers for gold, flew to GOLD to go's factory in Germany to check out the prototype when it was first unveiled.

Locatelli was having a hard time keeping up with the costs of rent and hiring employees, so when he came across the GOLD to go ATM online, he saw it as a golden ticket to an efficient way to expand his business.

"When you see exchange rates going up and down every day with the euro under so much pressure and stocks decreasing, this gold machine seemed like a very sound idea," he said. "In times like these you must think of somewhere else to put your money, and physical gold still has great appeal for everyone."

Locatelli is now launching a GOLD to go ATM in Milan's Bergamo Airport, which he says is one of Italy's fastest growing airports.

"[Bergamo] is a great place for it, because serious international business travelers will stop over here a few times a month at least," he said. "In general you tend to spend more when you're traveling and in a good mood, so you can now use a vending machine to get a present for someone or buy some bullions as an investment."

After a three-month testing period at Bergamo Airport, Locatelli said he hopes to introduce gold ATMs in every airport in Italy as well as major community centers and banks.

Not for serious investors? While the ATMs could be a hit with wealthy travelers, the idea is unlikely to catch on with serious investors, said Jeffrey Nichols, managing director at American Precious Metals Advisors.

"It's an interesting phenomenon, and I can see that wealthy and high-net-worth travelers might make impulse splurges on gold bars or coins, but I can't see a serious investor buying gold through a vending machine," he said.

Jon Nadler, senior analyst at Kitco Metals, agreed, saying that he would be surprised if investors bought into the new invention, because unlike the spot market, ATMs don't take your gold back when you want to sell it.

"Gold is a two-way market, so I would like to see that same machine buy back that gold and spit out cash," said Nadler. "A gold-dispensing ATM is great, but a real ATM also accepts deposits."

Nadler also said that GOLD to go's higher prices may be a deterrent, especially to investors who want to purchase large amounts.

GOLD to go says that, like any physical gold vendor, it must apply a margin to its items. While the spot price for one ounce of gold was about $1,214 in midday trading on Thursday, GOLD to go was selling a 1-ounce gold bar for 1,044.86 euros, or approximately $1,284.13.

But the ATM's popularity shows how much more available gold is becoming as demand picks up.

"It shows how attitudes toward gold are changing," said Nichols. "Gold is available in more forms and through distributors that make it more accessible for average people around the world to buy gold."

Walking from a mortgage has big consequences

Walking away from a mortgage you can still afford to pay has consequences; everyone knows that. Your credit score is shot and it can be impossible to get credit.

Some homeowners, no doubt, believe that the credit score hit is worth getting out from a deeply underwater mortgage. They may owe, say, $500,000 when their house value is only valued at $350,000. And, they figure, there's no way it will ever be worth what they owe so it's better to get out from underneath the burden.

After default, they reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.

Don't count on it.

While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time.

"It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.

How foreclosure impacts your credit score

"Credit scores are only one component of a complete credit decision," Brinkmann said. "[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage."

But future underwriters will scrutinize their records very closely, and if they find no precipitating factors leading to the defaults -- no job loss, no health issues --the repaired credit score won't overshadow the black mark of a walkaway.

"If you made a strategic decision to default on paying your mortgage, it will work against you," said Bill Merrell of the National Association of Review Appraisers and Mortgage Underwriters.

Merrell, who teaches underwriting, said banks are looking at several factors in determining whether to grant mortgages: the amount of money borrowers have in the bank; employment histories; payment history.

However, banks may be far more lenient if the default resulted from factors somewhat beyond the borrower's control, such as from local economic problems. "They'll give you more consideration if it's job related," he said. But, he added, banks look at strategic defaults "very negatively."

That said, it's not impossible to get a loan. Banks still want to make interest payments, so they might be willing to gamble with a walkaway.

"It might be a little more difficult for them to borrow, but [banks'] drive for market share -- to profit from making loans -- will trump that caution," said Keith Gumbinger, of the mortgage information publisher HSH Associates. "I don't think we'll see a full denial."

It's hard to foresee the state of mortgage lending six or seven months from now, let alone seven or eight years into the future. So lenders may look at applications from one-time strategic defaulters and say, "Yes, they walked away but it's a whole different market now," according to Gumbinger.

Even so, lenders may require more from borrowers who walked away than those who didn't.

"To the extent they could get a mortgage," said Brinkmann, "they can count on needing a heavy down payment."

The lenders may ask for 30% down or more. That would provide enough collateral cushion that the bank could get all or most of its money back in a foreclosure.

Strategic defaulters might also be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive

Solve your health care challenges

P

remiums soaring? Your insurer denied your claim? Retiree benefits got slashed? Try these strategies to cure what ails you when it comes to getting and paying for medical care.

Via money.cnn.com


Challenge # 1 - Your Premiums are too high
The employee share of premiums on company health plans has more than doubled since 1999, to $3,515 a year on average for families. Now employers are devising new ways to shift costs onto you -- moving from low co-pays to co-insurance, where you pay a percentage of the bill, or slapping on new and bigger deductibles.

The solution: Take advantage of the myriad ways your employer also gives you to save money on health care. During open enrollment, sign up for a flexible spending account, which typically lets you stash up to $5,000 tax-free to cover out-of-pocket medical bills (that max drops to $2,500 in 2013). Savings: up to $2,000 a year.

Enroll in the mail-order prescription plan -- you might pay $65 for a 90-day supply of a brand-name drug, vs. $200 at the pharmacy. And switch to a preferred or generic drug, if possible, since many companies are raising your costs on non-preferred and brand-name drugs only.

More than half of large firms are also offering incentives that can modestly lower your costs if you make an effort to get healthier. You might earn $100 in cash, say, or get a $20 lower monthly premium if you enroll in weight-loss classes. Not interested, even though you're battling the bulge? Watch out. A growing number of companies are now penalizing employees for unhealthy behaviors, most commonly by imposing a higher premium.

Challenge # 2 - You need an individual policy


More than half of adults who tried to buy an individual plan over a recent three-year period found it very difficult or impossible to find an affordable policy, according to a survey by the Commonwealth Fund. Premiums on solo policies can run two to three times more than you'd likely pay in a group plan, even though they typically cover less of your bills.

The solution: Starting in 2014, subsidies to buy individual policies will be available to low- and middle- income people. A family of four who earn less than $88,200 today would qualify. New standardized policies will also make it easier to compare plans and understand what you're buying.

But for now your best move is to try to find cheaper group coverage. Contact any professional or trade association that you might be eligible to join and ask if they offer a plan for members. One caveat: Not every health plan sold through associations is a group policy; sometimes insurers are allowed to market individual plans through the organization, warns Cheryl Fish-Parcham, deputy director of health policy at Families USA.

No luck? Comparison-shop among individual plans at ehealthinsurance.com to find your best deal. Note that prices are for people in good health; you won't know exactly what you'll be charged until you apply, but if you're not happy with the quote, you're under no obligation to buy.

A word of warning: Avoid plans that take all comers and only offer discounts on care or a limited benefit, such as a flat $500 for a hospital stay. "If anyone can qualify, it's probably not true medical insurance," warns Carrie McLean, a consumer specialist with eHealthInsurance.com.

Challenge # 3 - Your confused by Medicare

A growing number of seniors in recent years have opted to enroll in a private Medicare Advantage plan rather than the traditional government program. The draw: For an average of $40 to $74 more a month over the regular Medicare premium, you usually get a host of extra benefits. But starting next year, Uncle Sam will cut fees to the insurers that administer the plans, prompting concerns that some will exit the market, hike premiums, or slash benefits.

The solution: You can reduce the risk that you'll get socked by big changes to your plan by sticking with an Advantage plan that's been around for at least five years and, if available, earns four or five stars from the government (check ratings at medicare.gov). That's because starting in 2012, top-rated plans will get a bonus from the feds that will offset some of the fee cuts. Plus, if your insurer alters the plan, you'll get advance warning, and will be able to switch out during open enrollment, before the changes go into effect.

Usually, though, if you have serious health problems, travel a lot, split time between two homes, or just want to see any doctor you choose, you're better off with traditional Medicare. That's because you generally have to stick with doctors inside the Advantage network or, if the plan allows, pay more to see an outside provider. If you go the traditional route, you'll probably want to buy Part D drug coverage and a Medigap policy to help pay your deductibles and co-insurance. Together those plans often have higher premiums than Advantage, but you'll pay less out of pocket if you fall ill.


Challenge # 4 - Your claim was denied


A sampling of states suggests that about 10% to 15% of health claims are denied by insurers. Even more worrisome, experts say denials are growing in previously rare categories such as oncology.

The solution: Don't back down. Your chances of winning a reversal are actually pretty good if you follow the process and deadlines specified in your denial notice.

Make your appeal in writing, send it by certified mail, and request a return receipt. Directly address the reasons the insurer gave for the rejection and include as much documentation as possible.

You went out of network? Explain your area had no in-network doctors for your condition. The insurer claims the care wasn't necessary? Describe your illness, prior failed treatments, and the consequences of not getting care; tuck in your medical records and a doctor's note. The procedure is too experimental? Follow the same process, and include medical journal articles showing the treatment can be effective, says Jennifer Jaff, executive director of Advocacy for Patients with Chronic Illness. Find abstracts to help at pubmed.gov or a medical library.

Denied again? Seek help -- typically you're allowed two appeals. Some state insurance departments of attorney general offices offer a patient advocate, or you can hire your own (for a flat fee of, say, $400 or a percentage of your recovered claim). Get more information atpatientadvocate.org or find an advocate at healthcareadvocates.com.

Still no luck? You often have one final shot with an independent third-party review board making the decision, either through your employer plan or your state insurance regulator. If that fails, don't forgo treatment. Instead, talk to your doctor and ask if he will work with you on a payment plan to make the treatment affordable.

Challenge # 5 - Your retiree health plan benefits were slashed

Retiree health benefits are a dying breed: Only 28% of companies now offer them to employees younger than 65, and 21% to those who are older. If you still have coverage, get ready to pay more: Employers are shifting more costs onto retirees, starting benefits at a later age, or requiring longer tenure to qualify.

The solution: If your former employer cuts your benefits entirely and you're too young for Medicare, you'll need to buy an individual policy. If you're healthy now, you'll save a lot on premiums by going with a high-deductible plan with a health savings account, which allows you to save up to $6,150 a year ($7,150 if you're 55 or older) for future health care costs. But your bills could quickly add up if you get sick.

Already 65 or older? You'll have 63 days to buy supplemental Medigap and Part D drug coverage to replace your company plan.

Rather than an outright elimination of benefits, though, you're more likely to be hit with higher premiums, deductibles, and co-pays. Even with these higher costs, you'll probably still end up paying less for care by sticking with your retiree plan. That's because company plans typically limit how much you can pay out of pocket and don't have coverage gaps like Medicare's doughnut hole for drugs.


Challenge # 6 - You've got a pre-existing medical condition


More than one-third of adults who try to buy health insurance on their own are turned down or charged more because of a pre-existing condition or have that condition excluded from coverage, the Commonwealth Fund reports. Health reform will prohibit insurers from rejecting children on this basis later this year. But the protection for adults does not begin until 2014.

The solution: If you've gone without insurance for six months or more, you'll be able to buy coverage at rates comparable to those paid by healthy people starting in July through a new national high-risk pool created by the health reform law. Otherwise, you'll have to wait more than three years for relief.

In the meantime, try to get on a group plan, which covers all members, regardless of health status, at the same price. (You may have to wait three to 12 months for the preexisting condition to be covered.)

Another option: Seek help finding an affordable individual policy from a licensed health insurance agent (find one at nahu.org), who can often steer you to an insurer that is friendlier to your condition.

Your last resort should be seeking coverage through an existing high-risk insurance pool; most states have one or a similar backstop. But your wallet will take a beating: Premiums can run up to three times as much as the average rate in the individual market. Find out the details about high-risk coverage in your state at naschip.org.


Challenge # 7 - You lost your job....and your health care 


With nearly one in 10 Americans out of work, this scenario is all too common lately. In a few years, when the individual insurance exchanges that are the centerpiece of health reform are created, you won't have to worry about losing access to health coverage when you lose your job. But for now, at least, your options are more limited.

The solution: If your spouse has a group plan you canjoin, that's clearly your best bet. Otherwise, you can stay on your former employer's group policy for up to 18 months, courtesy of the federal law known as COBRA (companies with fewer than 20 employees may be exempt). Sure, it's expensive, since you'll have to pick up the full tab, but it's still usually your next cheapest option for comprehensive coverage. (If you were laid off between Sept. 1, 2008, and May 31, 2010, you may qualify for a 65% government subsidy to help defray the cost; go to dol.gov for details.) You have 60 days to sign up and, in case you get a job in the meantime, you can wait until near the end of that period to enroll -- coverage will be retroactive.

Currently in the priciest Cadillac version of your company options? You can downgrade to a less expensive one when you sign up. If you can't swing that $1,000-plus premium, you can go with an individual plan with a big deductible. Those policies start at around $300 for a family but can cost thousands if you get sick. Avoid short-term plans, which cover catastrophic care and usually last only one to 12 months. They may cost a bit less than a typical bare-bones policy. But if you develop a condition while in this plan and you're forced to buy a regular individual policy after it expires, you're likely to pay more or face exclusions

How to raise your credit score

Are you struggling finding a loan because you have a low credit score? Having bad credit isn’t a life sentence. You can do things to raise your credit score.

1. Pay your bills on time. Even if you’ve been delinquent in the past, paying on your credit cards monthly starting now you’ll begin raising your credit score.

2. Keep credit card balances as low as possible. It’s better to have five credit cards with small balances rather than having two credit cards with large balances. Your debt to credit ratio is figured out this way and many lenders use it to decide if you should get a loan or what your interest rate will be.

3. Don’t sign up for too many credit cards. While having credit is good, having too much can hurt you too. However, if you don’t have any or just one, it could help you establish more credit by getting a second one.

4. If you have a dispute with a credit card charge don’t let it go and not pay it. It will look like a delinquency and decrease your credit score – even if it’s not your fault. Work with the credit card company to either ensure it doesn’t get reported OR pay it and then work on getting a refund.

5. Request your credit report and check for errors. If there are erroneous charges on it, take care of it as much as possible. If you can’t resolve it, pay on it to get it eliminated.

Remember if you are looking to get a loan in the near future, you may want to look into credit rescoring.

Legal defenses to foreclosure?

• The "Truth in Lending Act" violations enabling rescission.(TILA) If your homeloan happens to be a refinance, the mortgage holder or the bank always provides a set of disclosures at the time of the loan closing. If any of these disclosures are not correct, the loan is legally rescindable according to TILA. An example would be in a foreclosure litigation, the finance charge must be accurate within $35 or the loan may be rescindable. This means that the loan is cancelled and all money paid to the lender or bank is refunded.
• The "Truth in Lending Act" violations enabling damages(TILA). In the case that you bought the property with the loan or if you used the proceeds to refinance and proper and legal disclosures were not given to you, then you may be awarded money damages to offset and stop the foreclosure.
• The "Home Ownership and Equity Protection Act" (HOEPA). The HOEPA is a very clear and powerful federal law that controls high cost refinance loans. In the case that the loan is below $150,000.00 or the original interest rate was above 8%, you need to evaluate your loan documents for violations of the HOEPA. Violations of this act would enable rescission and high money damages that could be in excess of the dollar amount of the loan.
• The Failure to Provide a "Correct Notice" of the "Right to Rescind".The correct notice that must be provided to customers that have refinanced at closing. If this form is not correct or acccurate, the loan is legally rescindable for as long as three years after the loan closing date.
• A "Breach of Contract". Much of the time the lender or bank will do certain things that are unfair or unjustified before they start the foreclosure process. Just as you have an obligation to pay the mortgage, the lender or bank has a legal responsibility not to interfere with your ability to do so – such as force placing insurance making the payments much higher than they should have been.
• The "Real Estate Settlement Procedures Act". This is a federal law that polices many types of disclosures that banks and lenders legally have to provide at the time of closing, I is also in place to prohibit things like kickbacks and unearned fees. It allows damages, and often times rescission if the error causes a TILA.
• The "Fair Debt Collection Practices Act". This is a federal law that requires banks and lenders who have obtained the mortgage after default must follow specific guidelines when they attempt to collect on the debt. Failure to abide by this law allows for statutory damages and legal representation fees.
• The "Fair Credit Reporting Act". This federal law governs lenders ability to report information about the mortgage and requires the accurate reporting of negative information. Violations of this act also enables damages and attorney’s fees. Punitive damages might be available under this act.
• The "Real party in interest". This is a defense procedure to foreclosure that will be very effective at stopping the bank's or lender’s ability to foreclose on the loan. It simply questions the ownership of your mortgage and also questions whether the foreclosing party is, in fact, the true holder of your mortgage and note.
• "Unconscionability". This type of defense brings an investigation as to the events surrounding the creation and the closing of the mortgage loan. If there is a violation here it gives the court a great deal of leeway in thier decision as to whether the mortgage should be voided or changed in any way.
• The "Failure to state a claim" upon which relief can be granted. This is a general defense that brings into focus, the lender’s ability to continue with foreclosure and it can be used in conjunction with any other foreclosure defenses.
• The "Failure to establish conditions" precedent. If you want to have a foreclosure thrown out of court right away? Use this legal defense that brings investigation to the lender’s pre-foreclosure processes, to ensure they did everything correctly and by the law.
• The Failure to comply with "FHA pre-foreclosure requirements". The FHA ( Fair Housing Act) requires that every lender mail written information called “How to Avoid Foreclosure” and conduct a face-to-face meeting with the borrower before foreclosing (in most cases). If the lender or bank has not taken these steps, then they cannot foreclose.

Note: this article is for informational purposes only and not intended to provide legal advice.  Only your Attorney can advise you on the most up to date and relevant laws for your circumstances.  To find a qualified Attorney in your area, visit www.findlaw.com 

Why do a mortgage audit? Here's why!

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Job-Loss Insurance. Lose your job and get your Mortgage paid for.

Some homebuilders, lenders and agencies offer insurance that will pay your mortgage for up to 6 months if you become unemployed.

Job-loss mortgage insurance -- which pays all or part of your mortgage payment if you lose your job -- can bring peace of mind to homeowners and would-be homebuyers alike.

And it's often available at no cost to homebuyers.

With the unemployment rate hovering around 10%, the highest in more than 25 years, it's not surprising people are hesitant to buy homes even in a low-rate, low-price market. And many current homeowners no doubt lose sleep worrying how they'll keep roofs over their heads if they join the ranks of the unemployed.

Once hard to find, job-loss mortgage insurance is now available not only from traditional insurers but from homebuilders, banks and other lenders, real-estate agencies, realty groups, and state and local housing agencies.

"The only reason people may not be buying (homes) now is fear of losing their jobs," says George Akers, the executive vice president of First Mortgage, whose mortgage customers get the company's Worry-Free Mortgage Protectionprogram free.

In Akers' experience, mortgage protection plans have become increasingly common in the past year or so.

Policies vary

As with any insurance product, policies vary. For example:

• The California Association of Realtors' Mortgage Protection Program is free for first-time homebuyers, who can get up to $1,500 a month for six months to help make their mortgage payments. The Realtors' Housing Affordability Fund has committed $1 million to the program.

• Genworth Financial's Job Loss Protection is available at no charge to buyers purchasing Genworth mortgage insurance. It covers PITI -- principal, interest, taxes and insurance -- up to a certain amount, also up to six months.

• Prudential Georgia Realty's Mortgage Protection Program is funded by the seller at closing for $500. One of many throughout the country affiliated with the Rainy Day Foundation's Homeowner Education and Loan Protection service, the program covers the lesser of the PITI or $1,800 a month, up to a maximum of six payments during the two-year coverage term.

"Job-loss protection plans in real estate are gaining in momentum," says Dan Forsman, the president and CEO of Prudential Georgia Realty, which began offering the program this year. "It's a bit early to quantify at this point, but I can tell you our 1,200 agents love having this as an option."

Forsman says it can differentiate a house from similar ones in the same market, especially in a market in which the greatest activity is in homes that have a lower price. Buyers of these homes -- often first-time buyers -- tend to gravitate toward the peace of mind offered by these plans the most, he adds.

In the fine print

As with any insurance plan or legal document, read carefully before you sign. Common provisions in the fine print include:

• Coverage level. "Consumers may believe the policy will cover the full mortgage payment or even other consumer debts," says Michael T. McRaith, Illinois' insurance commissioner. McRaith says many of these policies "only cover the minimum payment required to keep the mortgage from foreclosure."

• Effective date. Policies often delay the date they become effective by a month or more to eliminate people who sign up for the plan when they know their jobs are in imminent jeopardy.

• Payment date. Don't assume your mortgage payment will go out the day after you lose your job. In fact, the check goes out to the mortgage company 30 to 60 days after the job loss.

Will it work for you?

Who are these plans best suited for? "Anyone in a company or career field that is not rock-solid in this economy," Forsman says, adding that recent college graduates may also be looking for some insurance assurance.

Many people are excluded from taking advantage of these plans, typically those who are:

• Self-employed.

• Already unemployed.

• Under age 18 or over age 60.

• Retired.

• In active military service.

Moreover, the job loss must be "involuntary." The definition of "involuntary unemployment" is narrow. It does not include quitting, resigning, retiring, expiration of an employment contract, being fired for cause or being on leave due to accident, sickness, disability, family obligations, childbirth, pregnancy, or scheduled seasonal or temporary breaks. If you're a union worker, find out -- before you sign up -- whether you'd be covered while on strike.

Some plans are only for first-time buyers (there's the likely assumption that this group is least likely to have an emergency fund after forking over a down payment) and must be handled at the closing. Some plans are available to current homeowners. Some are renewable; others aren't.

One more thing: Any payments made on your behalf to the mortgage company may be considered taxable unemployment benefits.

"Evaluate carefully whether the investment is well-spent," McRaith says. Could the premium paid be better spent or saved elsewhere? "As the decision is made, the consumer should ensure that his or her unique financial and life circumstances are properly considered."

This article was reported by Melissa Ezarik for Bankrate.com.

Homeowners abandoning houses en masse

Via CNN Money Posted by Beth Braverman

April 30, 2010 4:12 pm

A pair of studies released Thursday found that more homeowners are choosing to let an underwater home go into foreclosure, despite their ability to continue to make payments. Researchers at the University of Chicago and Northwestern University found that 31% of foreclosures appeared to be strategic, up from 22% in last year.

As the number of borrowers who walk away from their mortgages increases, the social stigma associated with foreclosure has started to wane, experts say. "It can be a very logical decision based purely on economics, numbers and returns," says Keith Gumbinger, of HSH Associates, a mortgage publishing website. "Is there better value to me to abandon this home and rent another one for less money?" A quarter of all borrowers — 11.3 million homeowners — were underwater on their mortgages at the end of 2009.

A Morgan Stanley report, also released Thursday, found that strategic defaulters tend to have higher credit scores, larger loan balances and more recent mortgages than those who remain in underwater homes. From an economic perspective, it makes sense for borrowers who are more than 25% underwater on their mortgage to consider walking away, says Paola Sapienza, a finance professor at Northwestern's Kellogg School of Management and a co-author of the study.

Borrowers who are up-to-date on their payments but underwater may also be walking away in protest after seeing government programs and bank policies aimed at their delinquent neighbors but offering  little assistance for them, Gumbinger says. The Chicago study found that the probability of strategic default increases by 23% when homeowners learn that their neighbor with negative equity has received a partial loan for forgiveness.

Strategic defaults do not come without consequences for the borrower. A borrower with a 780 credit score could see his score fall 150 points after walking away. But if he keeps his credit pristine otherwise, he could be back in prime range — and be able to purchase a home — within two or three years, says Craig Watts, a spokesman with the credit scoring firm Fair Isaac.

Let's put credit scoring aside for a moment and think about the moral dimension. You can find thoughtful arguments both for and against strategic default. What do you think of the ethics of walking away from an underwater home, even if you have the means to pay?