An underwater Richmond homeowner tries to hang on

Conway is still trying to do the right thing by not walking away from his obligations. “I could easily dump this house, run away, get a two-bedroom house somewhere else for twelve, thirteen hundred dollars and just let it go,” he said. “I’m trying to stick around, trying to do the fair thing, trying to do the right thing.”

He told Real Money he tried to negotiate a principal reduction on his mortgage to bring it in line with the current value of his house, but his bank only offered to lower his interest rate. “It’s not fair. That mortgage is not moving at all,” he said. 

Nor is it likely, too, because Conway’s mortgage is locked in a private label security—loans that were bundled up with others and sold off to loads of investors. PLS mortgages were among the most toxic, issued during the housing boom and untangling them to forgive principal is rife with difficulties. 

“When you have this scattered multitude of relatively, for the most part, passive investors on the one hand and one home owner on the other, it’s simply logistically impossible to negotiate some kind of a work out,” Cornell University Law Professor Robert Hockett told Real Money.  

While house prices are firmly on the upswing in many parts of the country, Richmond is still struggling to crawl out of the underwater mortgage hole that still engulfs more than 40% of its homeowners.

As I stood with Conway in his driveway, he pointed out four houses within a 20 yard radius which like his, are underwater, and three more which the owners were forced to sell short at a loss. “When you have a neighbor that’s underwater it’s like a camaraderie,” he said. “We all know who we are.”

Conway is an avid supporter of Richmond’s plan to buy troubled mortgages like his through eminent domain so homeowners can refinance with cheaper loans that reflect current prices. 

But the plan has been hit with formidable challenge in recent weeks, including lawsuits arguing that if Richmond forcibly purchases mortgages through eminent domain it could restrict credit to the city and undermine the nation’s mortgage industry if other communities follow suit. Opponents also contend that the plan would enrich a select group of homeowners at the expense of investors who own their mortgages.

But Conway insists, he’s not trying to profit as someone else’s expense. “I’m not a selfish type of guy,” he said. “I just want you to take your foot off of me, that’s all.”