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| 30 Yr Fix |
6.05% |
-0.01% |
| 15 Yr Fix |
5.60% |
0.01% |
| 1 Yr ARM |
5.29% |
0.00% |
| 5/1 ARM |
5.67% |
-0.06% |
| 30 Yr Tres |
4.56% |
-0.06% |
| Fed Prime |
5.00% |
-0.25% |
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Stop Paying Your Mortgage and Walk Away?
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The statistics are all over the place, but it is clear that not only are mortgage
delinquencies and foreclosures skyrocketing, but millions of homeowners are
"upside-down" in their mortgages; that is they owe more to
the bank than their houses are worth and a report this week predicted that number
would be growing exponentially.
More and more the talking heads on television have suggested that these upside-down
homeowners should cut their losses and hand the bank the keys to the castle.
Some have even suggested that cash-stretched and equity-poor debtors should
continue paying the credit card bills even as they stop paying the mortgage.
The rationale? The house is already a dead loss and continued credit card access
will help the homeowner get back on his or her feet.
The attitude was unheard of in an earlier day. An obligation was an obligation
and there was none as important as the one that kept a roof over one's
head. But there is a lot about the current financial crisis that has changed
the attitudes of many Americans toward that mortgage payment.
First of all, many borrowers feel as though they were taken for a ride by their
lenders; talked or fooled into mortgages they couldn't afford. Even though
borrowers were often complicit in the misrepresentation involved in their loans,
they feel aggrieved by the process and not responsible for the result.
Then there is the mob rule effect. The media is so full of
reports on the foreclosure crisis and there are so many anecdotal reports of
people mailing keys to their lenders (CNN Money says it is called "jingle
mail") that it has taken on the cover of "everybody is doing it," and
many people are.
Well we have said it before - there is no situation so dire that someone
can't figure out a way to make a buck off of it.
The newest wrinkle is a company that assists homeowners with the process of
walking away from their mortgages. You Walk Away, LLC. asks
visitors to its website "Is foreclosure right for you?" and follows up with
five questions to help a homeowner make the decision:
- Are you stressed out about your mortgage payments?
- Do you have little or no equity in your home?
- Have you had trouble trying to sell your house?
- Is your home sinking under the waves of the real estate crash?
- What if you could live payment free for up to 8 months or more and walk away
without owing a penny?
Those who self select - "well gosh yes, that bit about living free
for 8 months is the clincher" - and who qualify by answering some
simple questions about their situation, are offered the opportunity to purchase
a You Walk Away plan. For a subscription that costs $995 the company will:
- Send a letter to the lender that promises to stop collection telephone calls.
- Provide subscribers with a free 1/2 hour consultation with an attorney to make
sure the foreclosure has been properly filed.
- Inform the homeowner of the exact number of days he can continue to live in
the home payment free and update that schedule regularly.
- Enroll the borrower in You Walk Away's affiliate credit repair plan which
they claim has removed thousands of foreclosures from clients' credit
reports.
- Appoint an experienced You Walk Away advocate available to answer any of the
borrower's questions throughout the process.
- Provide information on state laws that, in select states, will prevent the
bank from attempting to collect deficiency money.
It appears that the You Walk Away plan, unlike a Deed in Lieu of Foreclosure,
does not stop the foreclosure, just mutes some of the aggravation
and uncertainty that usually accompanies it. A Deed in Lieu, if the bank is
willing to accept it, may be a more credit history friendly solution and it
may be possible to obtain assurances in writing that the bank will not pursue
a deficiency.
All of what You Walk Away does is probably legal; possibly it is effective
(although the promise of credit repair is always a red flag); but before you
plunk down the nearly $1000 fee, please contact a non-profit credit counselor
in your area.
One of the questions that you need to ask a counselor is whether, in your state,
a lender is able to go after the difference between the value of the house and
the balance of the loan. You Walk Away started in California (it is reported
to be expanding quickly into other states) which does have an anti-deficiency
law, but not all states do.
A list of reputable credit counselors can be found at www.hud.gov,
check under "At Your Service" on the home page.
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Comments (29)
| WOW! how did these people get to this point? I mean really we are all adults ( i hope) HOW did you not know after signing 145 different papers that you'd be resposible for the financial obligation you intiated.. chances are no one forced you to buy a house (condo, townhouse, shack whatever) you did so willingly. How in the world did you NOT know the rate was going to adjust? what did you think ADJUSTABLE RATE MORTGAGE meant? LMFAO the worst part is an arm 5/1 was only slightly lower than and arm 7/1 or 10/1 most idiots went for the shorter term 5/1 ARM! i swear here in the Wash DC area is was like 5.3 for a 5/1 ARM and 5.5 for a 10 year ARM in the year 2006 at least if your going to gamble take the longer term? DUH! i dont think the government should bail out a soul.. if you are TRULY that stupid you need to lose your house and have bad credit for the rest of your life..and if you fall for this WALK AWAY LLC nonesense you obviously have not learned from the 1st 25 mistakes...I'm in the wrong line of work. LEGALIZED SCAM ARTIST should be a major in college forget business administration LMAO |
|
| Above Posted By:
Anonymous
| Thu, 17 Apr 2008 21:45:28 EST |
| I read a an article about a speach on a gov website? someone in the government, I can not name him unless I can find the article to remember exactly who it was, but he is very well known. Shortly before all of this mortage mess really came down. He said the government had a plan to aquire a good amount of property. I hope this is not true. I hope I am wrong and possibly crazy. If this is true, someone needs to act quickly. |
|
| Above Posted By:
anonymous
| Thu, 3 Apr 2008 10:20:42 EST |
| OK you guys feel free to chime in if you wish but in my opinion the gov is trying to prune the top of the tree rather than fix the roots. What I mean is they are concerned with foreclosure this foreclosure that and yes I agree they need to step in but what they really need to fix is the way credit reports. We need a more standard system of how and when credit reports so that consumers can better understand. I mean if someone handed a consumer a sheet that said apply for a car loan and your scores goes down x amount of points for x amount of time people might think twice before applying for every line of credit they can. I guess my main point is if people know the workings of something they can better manage it and it would seem to make more sense if we started with the basics.
|
|
| Above Posted By:
Andrew
| Tue, 1 Apr 2008 20:15:36 EST |
| what would happen if banks were no longer permitted to securitize mortgages? wouldn't that put an end to the whole fast money game? If they had to live with those loans for 30 years they might be more careful who they lend to...
Having worked in the finance industry for a long time I have always marveled at how banks can take a perfectly good business model and loose money at it...are bankers the worst business people ever?! Or is it like the bible says "..neither a borrower nor a lender be"? They get money in they loan money out and they make money on the interest rate spread...how can they lose so consistently? Fascinating! |
|
| Above Posted By:
fractalshift
| Tue, 1 Apr 2008 16:16:21 EST |
| We bought our home in 2001 for $145K. It was apprasised on 2006 for $425,000 We took out an equity loan of $100k for some home improvements + operating capital for our business. Our business tanked in 2007. We tried to refi in January and we were told our home is only worth $350k. We owe $360k. Now our home is worth $255K What would you do... walk away??? |
|
| Above Posted By:
BubbaJoe
| Thu, 20 Mar 2008 12:19:33 EST |
| Part of the problem is the BPO's and nugget appraisers that were contracted for the REO's. I have performed reviews on over a thousand here in southwest Florida, and the total lack of knowledge, and ignorance is just outstanding! BPO's 30 to 40% over real value, agents neglecting to report "Cumulative Days on Market" which would expose just how long it really takes to sell something, and price reductions. And appraisers ignoring sales (like within 30 days, and several blocks), pendings and listings, to come in at a value $100 k over what the property finally ended up selling for. What else would you expect from a "shake and bake" appraiser that only does the minimum to obtain and maintain a license, whatever state. Lenders got what they deserved. dumb down the business, garbage in, and by god, garbage out. Curiously, the real estate agents and such are silent, only telling people to buy. Not a lot of confidence in the buyers though. starting to see "double bottom" reo's already. And I thought living through the S&L/RTC fiasco would be enough for one lifetime. |
|
| Above Posted By:
willinFL
| Tue, 18 Mar 2008 17:51:09 EST |
| My idiot brother in law lost his house last year. He had it for almost 30 years, but what he had done was to take all of the equity out and spend in on junk. Now he lives in a two bedroom rental and acts like all is well. Such a fool, but I am discovering that he is not alone. People, your house is not a piggy bank, nor should it be treated like an investment. Live in a house to make it a home, not to make you rich. |
|
| Above Posted By:
Tired of it all
| Mon, 17 Mar 2008 11:33:57 EST |
| One of the biggest problems is that the home owner is sometime to proud to seek help before its to late. I have come across so many homeowners that will listen to the guy that runs the 7-11 store before they will listen to me. And believe me, I know that most home owners are more afraid of Loan Officers than Bankers, but the funny thing is that the banker will cut you faster then an L.O. And the worst part is when they check, Loan Officers will always give better rates than any bank! Guess what people!!! The very same bank that just turned you down for that $700k loan is the same bank I JUST GOT YOU'RE LOAN TO GO THROUGH!!! Hurts DON"T IT!!! If you can find a good L.O. that knows what he our she is doing, they can get your loan done. Don't just walk away from what you worked so hard to get. Find the right one to help you. Oh! And please stop all the doog gone free- loading thinking you people with jacked-up credit are to get something for nothing. you mess your stuff up so why should you feel that you're closing cost should be free? You jacked it up? Shut-up and pay the person that just kept you from being homeless. (This is just one L.O's way of thinking) We have to eat also. |
|
| Above Posted By:
Chuck The Loan Officer
| Thu, 13 Mar 2008 20:45:25 EST |
| If one gets 8 months "free" will that be taxed as "income" in the following year?
If mtg pmt was $1,200/monthly = $14,400 liable to "income tax" |
|
| Above Posted By:
JazLive
| Thu, 13 Mar 2008 19:21:42 EST |
| Well, screw the banks and the fed for backing this crap to begin with. Lets just print more mony and inflate the economy even further. It's the Fed Reserve way! CROOKS |
|
| Above Posted By:
Anon
| Thu, 13 Mar 2008 10:31:42 EST |
| What I am more confused about with this whole situation is the Banks rational. I have a home that I fell behind in payments, I found a buyer ready and willing to purchase the home for 205,000. on a short sale, (property was purchased for 265,000 a year and a half prior) the buyer had the loan ready to go, well the bank refused to go lower then 254,000. The homes are selling for 220,000 to 235,000 in the neighborhood. The bank foreclosed on the home and I just found the home listed for 275,000. What are they thinking?. |
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| Above Posted By:
Anonymous
| Wed, 12 Mar 2008 19:00:04 EST |
| No you don't have a "right" to something just because someone else can afford one. That's called envy. You can be wealthy at 45k a year, but you chose not to be. You just have to live within your means and quit buying things that are worth nothing on credit. Start with the house you can afford, think of creative ways to finance a house that is smart and don't be stupid like the people walking away from their homes. Their decisions got them there in the first place. Don't follow after them. You have the "right" to freedom and the pursuit of happiness. That doesn't mean you are "entitled" to them. With those rights come the responsibility of doing what's right to obtain what you want. That's why all these people buying houses with interest only loans so they can live in a huge house that they normally can't afford get in trouble. |
|
| Above Posted By:
Carlos
| Wed, 12 Mar 2008 15:59:46 EST |
| See what you people did? Now i'm looking for 700K house on my 45K job and no one would give me a loan? Don't I have a right to a 5 bedroom colonial as everyone else? |
|
| Above Posted By:
Tuma
| Wed, 12 Mar 2008 13:36:58 EST |
| What happens if the Fed starts taking mortgage backed bonds as collateral and the banks default. Will the Fed foreclose? |
|
| Above Posted By:
anonymous
| Wed, 12 Mar 2008 13:07:40 EST |
| Regardless of why you walk away and whether or not there is
any legitimacy to your walking away, you need to vacate once
your decision is made. Do the right thing and offer a deed-
in-lieu of and move your life forward. You may or may not have a legitmate beef for your decision to walk but you do not have a right to a free roof over your head. If you truly feel walking is in your best interest then do so with dignity. Regardless of any wrong doing you believe you are suffering, two wrongs don't make a right. Wall Street, the GSEs, lenders, loan originators, bankers, realtors etc. will continue to take their public thrashing. Are you willing to take yours when you decide to live free in a home you have no intention of paying the mortgage on? |
|
| Above Posted By:
Anonymously annoyed
| Wed, 12 Mar 2008 11:56:36 EST |
| Though the state of Califorina might prevent a lender from trying to collect the deficiency balance, and the federal government allows you to not be taxed on the 1099 you're "going to receive" from the lender, the "State of California" however, says, pay up! The state DOES expect you to pay the tax due on that deficiency balance shown on your 1099. |
|
| Above Posted By:
Caution
| Wed, 12 Mar 2008 09:39:40 EST |
| Why walk away? Since in many cases no one knows where the note is just stop paying and challenge them to prove they own the note! If they have it you are no worse off. |
|
| Above Posted By:
anonymous
| Wed, 12 Mar 2008 09:24:56 EST |
| I disagree with some of the comments. I live in Nevada and bought our home with a 20% down payment. We bought in 2004 for $300,000. Value went up to $325,000. Now due to the credit mess here in Nevada and elsewhere, our home is valued as of last week $189,000. Every house but ours and 1 other was an investment property, so they walked away. Now the banks are trying to sell as fast as they can and they do not care what they get for it. Min. bid on a house just like ours is $89,000 and it sold for $ 150,000 last week. So now our home is worth even less than before.So now we are upside down on our mortgage. I think a lot of the falling value is due to banks taking what they can get and so what to home owners. |
|
| Above Posted By:
carol
| Wed, 12 Mar 2008 08:32:54 EST |
| George - how can the appraisal, in your example $240k, be correct if FMV is $180k? Any banker with a brain would use an appraiser who values the home as a distressed property at time of foreclosure. No one uses the original appraisal from origination. |
|
| Above Posted By:
rick
| Wed, 12 Mar 2008 08:26:34 EST |
| We are all in for a long term problem if consumers start
viewing this crisis as a "Badge Of Courage" when sending
'Jingle Mail.' |
|
| Above Posted By:
Rockey
| Tue, 11 Mar 2008 21:17:13 EST |
| Every state is different. A deed in lieu is a "voluntary foreclosure" and is as bad as a foreclosure, it benefits the lender by saving time and money. It benefits the seller by getting rid of a problem property. The only way to save face is to try and obtain a short sale.
Deficiencies are very hard to obtain and if the lender chooses foreclosure by advertisment they waive thier deficiency rights, at least in Minnesota.
Everyone is to blame for the problem we are in. Borrowers took out too much credit and did not educate themselves. Lenders came up with way to risky programs and brokers (both mortgage and real estate) were hungry for $$$ and put aside their better judgment. |
|
| Above Posted By:
Nate
| Tue, 11 Mar 2008 18:22:28 EST |
| If your prejudging me your dead wrong . I have over forty
thousand in equity in my properties . Excuse me I put down
20% on my investment property . Although Kevin I do agree
on alot of what you said. I just had the money to invest.
Charles |
|
| Above Posted By:
charles
| Tue, 11 Mar 2008 18:16:39 EST |
| Oh, please. I see these people as the ones who either put very little down or have refinanced to the max and sucked all the equity out and squandered it on junk and now have nothing to show for it. They ultimately have no investment in the property. They are probably the same group that doesn't care if their car gets repo'd. I own rental property and see the don't care attitude alot. And yes, it is the time to buy. I usually am in a foreclosure daily and you would not believe the way these people leave these houses. They don't care if their credit is ruined. The people with bad credit are what fueled the subprime market anyway. They know that a few years down the road they can get another loan, albeit with a sky high interest rate, but that doesn't matter. What matters is just what is here today, if another problem arises they can walk away from that too. It is stated that the majority of foreclosures are adjustable rate loans. Are all these people so stupid that they did not know what this means? I have had one and they are no fun, but I didn't walk away. Mine adjusted up to as high as 10 percent. I sucked it up until I could do something different. That is what these people should do, stop paying your credit card and pay your mortgage. Ride out this storm and times will be better. It has always happened. My parents grew up during the depression and I guess I was just raised different. In fact my father never even had a credit card. Americans are a country of have to have it now. If you don't have the money but have to have it now, just charge it! I think this is a contributing factor that causes people to not be able to pay mortgages. These idiots are carrying balances of 25k or more and what hurt these people is when the minimum payment changed. they can't keep up. They have to have all the other stuff they can't afford. They have to keep up with the Jones's. I, myself have been guilty of this but I pay my bills and value my credit. It boils down to the same old thing, a few bad ones are spoiling it for everybody. Just my opinion, thanks. |
|
| Above Posted By:
Kevin
| Tue, 11 Mar 2008 17:04:08 EST |
| True forclosures are rising everyday. Alot of them could have
been prevented in the first place . With a simple refi. I know
I did a refi , and now have a fifteen year note with a great rate.
I also have rental property that is doing very well .
World academy of realty / June /22nd / 2006 |
|
| Above Posted By:
charles glaser
| Tue, 11 Mar 2008 16:25:06 EST |
"Where's the pride?"
What happened to the pride from the other side when corporate america was robbing the consumer blind? I don't feel one bit sorry for any company that is suffering because people are walking away. |
|
| Above Posted By:
BS
| Tue, 11 Mar 2008 15:39:41 EST |
| It is a very difficult decision to make. Walking away from your home is not easy, even if there is little or no equity in the home and the monthly payments are overwhelming. Mortgage problems can keep you awake at night and your life becomes sheer hell.
Unfortunately, I am speaking from first hand experience. I had no equity in my Atlanta condo. In fact, I had overpaid for it without realizing it. I didn't walk away, but thought about it endlessly. My home foreclosed in November 2005 due to mortgage fraud and predatory lending on the part of the loan officer. My advice is: Don't let it happen to you. Never ever. Eugenia Renskoff |
|
| Above Posted By:
Eugenia Renskoff
| Tue, 11 Mar 2008 15:13:30 EST |
| It really is sad to hear that people that signed a note, knew what they were doing, signed all those documents at closing, are just walking away. That hurts every one. What happened to the days when you signed on the dotted line and that meant something. Where's the pride? How do we trust borrowers if that means nothing? What will happen to all "credit" if everyone just walk away? Keeping in mind that over 80% of homes are current and paid on time, I would hate to see most of us that are upside down just walk away and say, "Well its someone else's problem, I'm not the one that going to lose money." That would be like saying, "Well my home increased in value so much over the last 5 years that I'm going to give some of that back to the lender that gave me the loan." There is a lot of bad press out there and it will take even longer for the correction with the "Selling of News" involved but I hope people will take some pride and responsibility and ride out this storm with the rest of us. Real Estate doesn't go through these cycles every often or for very long so don't wait to buy real estate, buy real estate and wait! |
|
| Above Posted By:
Ryan D Bolton
| Tue, 11 Mar 2008 15:04:45 EST |
| There are only 2 concerns that one has when considering walking away from a property, ie., destroying one's credit and the deficiency judgment. There is no question that a foreclosure will still allow the owner to stay for at least 8 months - probably more - since the courts are saturated with foreclosures. But this service really helps in no way at all, except giving some peace of mind that you won't be thrown out into the street tomorrow (and I concede that most borrowers do not realize this!)
Once you are aware of what is going on in today's market, there are other alternatives we suggest.
1. Hiring a good foreclosure defense attorney will protect your legal rights and actually extend the period of time that you don't have to make payments.
2. A short sale or deed in lieu will lessen the credit hit rather than just letting the property go in foreclosure.
3. In Florida, as in most states, there is no question that the lender may obtain a deficiency judgment (whether or not they pursue it is another matter).
In other words, other than giving the borrower the peace of mind of knowing he has some time, he is getting absolutely NOTHING for his $1000 fee.
I am not taking a moral stand on whether or not the borrower should stop paying. If he is upside down in the property, it does make good business sense (although we, of course, do not come out and recommend this course of action). The problem I have is that you are getting nothing for the $1000. It costs NOTHING to try and negotiate a short sale with the bank, which would likely dispose of the deficiency. Or, for the $1000, you could stretch out the foreclosure and stay longer without paying - or negotiate a deed in lieu with the bank - either of which is a better (or, shall we say, a more profitable) outcome than simply walking away. As far as credit is concerned, both alternatives are significantly better than allowing the foreclosure.
If you have already made the business decision to stop paying, either just walk away and save the $1000 or do it right and actually get something for your money.
|
|
| Above Posted By:
hilton
| Tue, 11 Mar 2008 13:55:31 EST |
| Well, believe it or not, if property is bid on on the courthouse steps by the bank seeking to forclose, they have to bid FMV of the property, and if they do not, then the judge does not grant them a confirmation. Here is an example:
Property is valued at 240,000 (per appraisal)
Borrower owes bank 200,000
Bank knows it can only get 180,000 for the property (true fmv).
If the bank bids for the property at 180,000, then attempts to get a confirmation from the judge for the 20,000 deficiency, the judge will not grant the confirmation, because in his eyes the bank bid under the fmv (per the appraisal). In this case, the bank can't go after the borrower at all.
So what is expected to happen is the bank bids (and puts forth) 240,000, gets back the 200,000 it is owed, and the sheriff hands the remaining 40,000 to the customer (his supposed equity in the property). The bank can now get a confirmation to go after the customer for 60,000 - 40k of which the bank handed to him.
Obviously, this type of situation arose because banks started giving 100% financing, and property values stopped rising. If banks had stuck to the 75% LTV, there would automatically be a built in reserve to accomodate such declines in value.
My point is this: People are indeed walking away, and even in states with deficiency provisions, it is very difficult to go after them. |
|
| Above Posted By:
George
| Tue, 11 Mar 2008 13:12:59 EST |
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I believe this is a GREAT solution, especially for those who have an ARM ,because they can't refinance and get a lower rate becaus...
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As a loan officer in the mtg business for quite a long time, I have seen consumers credit go to "pot" over the years. We live in a...
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All I would like to say is,why does the federal goverment and some state goverments wait until the CITIZENS of the United States a...
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