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Let's try to see something positive in this situation. Like "the" mentioned, he took the money on the refi and presumably paid off some short term debt. That should have freed up some cash that will come in handy now to make the larger payments. He still has the house and shelter, so he is getting something for the money. He is preserving his credit rating by continuing to pay the mortgage. Like JMPRO says, he is also avoiding a tax payment to both Michigan and IRS by keeping the house(I also just read about that).
If he can avoid a foreclosure, by all means avoid it-banks don't forget people that break contracts and cost them money. I recently sat though a class on the effects of foreclosure and bankruptcy given by a local attorney, and believe me it ain't pretty!
Maybe he could go after the local tax assessor and plead the case to lower the assessment based on current sales. That might save a little.
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