Owners of flood-damaged homes walk away from ‘underwater' mortgages

“It’s like something died in the neighborhood,” Ziegler said.

Just off Maxham Road in Austell, between Veterans Memorial Highway and Old Alabama Road, sits Salt Springs Place. The cul-de-sac is home to about 6o townhomes and is perpendicular to Sweetwater Creek.

The neighborhood’s proximity to the creek couldn’t be mistaken when the rains came on Sept. 20. The flood that resulted was of  "epic” proportions, the U.S. Geological Survey said later.

The rain caused Sweetwater Creek to spill out of its banks and deposit more than 5 feet of water on the second floor of homes on the lower end of Salt Springs Place.

Cleanup started as soon as the water began to recede. Rivard-Carson, who had no damage in her home, helped neighbors like Ziegler pull out soaked carpets. It looked like the neighborhood would make a comeback, but then everything stopped.

“I didn’t see as many people working after a while,” Ziegler said. “And then in some places, after they’d been gutted, nothing happened.”

Ziegler and Rivard-Carson were worried their neighbors were walking away from their mortgages.

Some of the units haven’t been touched for more than six months, they said.

“I heard one sold -- it was really a shell, more or less -- for like $11,000,” Ziegler said. “Can you believe that? We can’t compete with those prices. I owe $68,000 on my home.”

Ziegler has decided to stay and make the best of it, but Rivard-Carson is undecided.

Rivard-Carson doesn’t want to walk away from the home she worked so hard to purchase, but she doesn’t see many alternatives. It’s not that she can’t afford her mortgage, but she wonders if she should keep paying for a home that’s not worth the money she’s putting into it.

“I talked to three real estate agents with three different companies about selling and they all told me I should just walk away,” she said. “That doesn’t give me a lot of hope.”

Hundreds of thousands of metro Atlanta homeowners with mortgages are in the same boat: They owe far more than the home is worth.

There are few statistics available on homeowners who abandon their mortgages. But there are a number of companies that track negative equity, a factor when considering mortgage abandonment.

Negative equity in homes is on the rise across metro Atlanta, according to CoreLogic, a national research company.

There are an estimated 1.5 million homes in metro Atlanta that carry a mortgage. In the last three months of 2009, there were 385,068 mortgages in metro Atlanta that were considered underwater -- where borrowers owe more than their homes are worth -- according to CoreLogic data. That number rose nearly 4 percent, to 399,129, in the first three months of 2010.

Metro Atlanta has the third largest number of single-family homes with mortgages in negative equity, according to Zillow, which gathers and tracks real estate data.

If negative equity continues to grow, more people might consider walking away from their homes, said Jon Maddux, chief executive of Youwalkaway.com.

“Inquiries are certainly up,” he said. “But it is so much more complicated than locking up the house and mailing the bank the keys.”

Maddux said his company offers advice for those who want to consider “strategic default,” which is a more well-executed plan than a haphazard abandonment.

For a fee, interested homeowners can get legal and tax advice that will help them plan, Maddux said.

“It is not a decision people take lightly,” he said.

Ziegler and Rivard-Carson don’t blame their former neighbors for walking away from their flood-ravaged homes; they just wish there had been another way.

Many of the homes that once had water on the second floor remain empty and some are unsecured. Tattered blinds hang in some windows, while others are bare. Overgrown yards, weeds growing between cracks in the sidewalk and abandoned cleaning supplies are just a few of the things that greet Ziegler each day when she walks outside.

“I ended up with around 3 feet of water on my first floor, but that was only because I’m a little farther up the hill,” she said.

Ziegler, who has lived in the neighborhood for five years, said she knows walking away from her mortgage would reflect negatively on her credit.

“It took me a long time to get the bit of good credit I have,” she said. “I just can’t throw that away.”

And though both women knew homes around them sold for less than either of them paid, the flood made things worse for the whole neighborhood.

“What gets me the most is, my house is worth the same as all of the homes that flooded but there wasn’t a drop of water in mine,” Rivard-Carson said. “But it doesn’t look like that matters.”

Rivard-Carson, who recently married, even tried renting her home after she was discouraged from selling. She didn’t have much success there, either.

“Nobody wants to rent here,” she said. “It’s just not the neighborhood I bought into anymore. I don’t know what I’m going to do.”