Friday, February 29, 2008
It's come to this, so soon
All the fancy new mortgage loans, like no down payment, interest only and such have led to a new phenomenon in mortgage lending, the walk away mortgage. With housing values dropping below what is owed, many people are discovering that there is much less pain in leaving the keys to the bank than in making an impossible payment. And in the spirit of free enterprise, there is even a new company whose business model entails enabling them to do so.
In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford. “I was terrified,” said Mr. Zulueta, who services automated teller machines for an armored car company in the San Francisco area.As the banks discover that they really can't spin gold out of straw or even nothing at all, this will become commonplace until they can get their hired hands to pass laws making it illegal. Until then a lot of bad credit decisions will be floating to the surface.
Then in January he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure...
...For Raymond Zulueta, the decision to go into foreclosure, and to hire You Walk Away, brought him peace of mind. The company assured him that in California he was not liable for his debt, and provided sessions with a lawyer and an accountant, as well as enrollment with a credit repair agency. He stopped paying his mortgage and used the money to pay down other debts...
...Jon Maddux, a founder of You Walk Away, said the company’s services were not for everybody and were meant as a last resort. The company opened for business in January and says it has just over 200 clients in six states.
“It’s not a moral decision,” Mr. Maddux said of foreclosure. “The moral decision is, ‘I need to pay my kids’ health insurance or my car payment so I can get to work.’ They made a bad decision, but they shouldn’t make more bad ones just because they have this loan.”
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