Read It Here First: You Walk Away.com
One month ago today, our site-of-the-day was You Walk Away Dot Com.
Today, there is a front page NYTimes article about -- anyone? anyone? -- You Walk Away.com:
"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...
You Walk Away is a small sign of broad changes in the way many Americans look at housing. In an era in which new types of loans allowed many home buyers to move in with little or no down payment, and to cash out any equity by refinancing, the meaning of homeownership and foreclosure have changed, economists and housing experts say...
Though many states give banks recourse to sue borrowers for their losses, Mr. Case said, in practice it’s not often done “It’s tough to do recourse,” he said. “It’s costly, and the amount of people’s nonhousing wealth tends to be pretty slim...”
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." (emphasis added)
Just doin' our job, keeping you informed a solid month ahead of the mass media.
>
Previously:
You Walk Away Dot Com.
http://bigpicture.typepad.com/comments/2008/01/site-of-the-day.html
Source:
Facing Default, Some Walk Out on New Homes
JOHN LELAND
NYT, February 29, 2008
http://www.nytimes.com/2008/02/29/us/29walks.html
Friday, February 29, 2008 | 10:36 AM | Permalink
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Comments
You are quite right. The blog Calculated Risk pointed this out long ago, too - in the comments there seemed to be mild shock (that consumers would not live up to a contract) and consensus that folks would start to make "business decisions" w/r/t housing.
A tangent to this is to see if consumers begin to shun debt and credit spending as well. Me tinks soo.
With this new social attitude of walking away is okay, and tighter lending - aka Wells Fargo placing almost all of CA on the Sever Distress catagory [no lending for LTV greater than 75%] will accelerate the downturn. Question: Parabolic usually means an upward monmentum can it be downward as well?
Posted by: Barley | Feb 29, 2008 10:48:09 AM
It's nice to see our entrepreneurial spirit is alive and well in America!
Posted by: Boom2Bust.com | Feb 29, 2008 10:48:16 AM
And the MSM is wondering why they're no longer relevant. Sheesh.
Posted by: Marcus Aurelius | Feb 29, 2008 10:50:31 AM
Technically, Mish's post was about 12 hours before yours. Your timestamp was 3:16 pm, while his timestamp is 3:19 am. I always assumed that he was the first mover on this, particularly since he got an interview with someone.
Posted by: Walker | Feb 29, 2008 10:57:33 AM
A return to LTV at 75%??
Who'd a thought a return to responsible lending practices would be the outcome of all of us. A little late.....
As already stated on CR's blog.....GAME OVER
Watch for an additional 25-30% haircut
Ciao
MS
Posted by: michael schumacher | Feb 29, 2008 10:59:28 AM
That's why I come here to read all the insights divulged.
As to the "walk away" business, I think it's a time lag thing. Since the contract ON America started screwing 98% of the populace in the 90s, that 98% has decided that two can play at the same game. The people have realized that it's a free-for-all atmosphere at the top and refuse to be preached to by the self righteous crooks. Snake oil is in a bear market.
Posted by: AGG | Feb 29, 2008 11:05:30 AM
A new twist to an old saying--Owe the bank a couple hundred thousand and the bank owns you, if you and several million owe the bank a couple hundred thousand, then you and everyone else owns the bank.
By the end of this year there will be an open offer by lenders to workout any loan. Not because lenders are kind, but because they cannot withstand further foreclosures, REO, and losses.
Posted by: Johnny Vee | Feb 29, 2008 11:14:07 AM
At this rate, taxes will have to be collected at the point of a gun. Our all volunteer military won't do it (once they have to point the gun at mom and dad). Blackwater and the Canadian military will be more than happy to step in and provide that service - for the right price.
Grover Norquist wins.
I'm going long in gibbets.
Posted by: Marcus Aurelius | Feb 29, 2008 11:15:27 AM
"walk away" would be better then burning ones home. Mad Money Jim Cramer jokes about people burning down their homes, he think it's funny, has he no shame? I feel sorry for him!
Posted by: Davis Hall | Feb 29, 2008 11:18:45 AM
I can't say as I blame them. As more people walk away from their homes, more will come on the market. This will lower the median price for existing homes and cause even more people to walk away. Despite what NAR says, we are along way from this being over.
Posted by: Pat G. | Feb 29, 2008 11:18:57 AM
With all of the counterintuitive moves the market has been making lately, I've created the following scenario:
"Market surges on news that Market is down more than 200 pts."
Posted by: Marcus Aurelius | Feb 29, 2008 11:19:01 AM
he's right of course--California is a NON-recourse state. You can walk away from your mortgage with no consequences other than the hit to your credit score, which as the site reasonably speculates won't really matter much when 1/3 of the "homeowners" in this state have "walked away" in the near future. The banks will have to lend to them in a few years, or they'll have no business left.
25% LTV will cause "starter" home prices to crash. No one in the "starter" home market has $100,000 lying around for a down payment. I've done quite a bit of analysis recently on the Bay Area market, where I live, and have determined that starter homes (less than 1500 sq ft), even after dropping 15% in the past 6 months (and adjusting for the historical $/sq ft premium attached to smaller houses), are still 20% overpriced.
Actually requiring down payments--Why the h*** would someone pay $500,000 for a 1000 sq ft 2 br (which many delusional sellers in the East Bay are still trying to get), when he can save up for a couple more years, skip a move, and just buy a 1800-2000 sq ft house up the hill for $600,000? (yes these examples are easily found).
Anyway, these lending standards, and subprimers (and now Alt-A) walking away will kill the lower end market. Just kill it.
Posted by: David | Feb 29, 2008 11:20:37 AM
What impact will walking away have on the credit card debts? There's a whole cottage industry out there that makes a living buying defaulted credit card receivables. Buy 'em cheap (think 2 cents on the dollar) and hounding the borrower until you get something, double your money pretty easy if you have a system and aggressive collectors.
I'm think 2 cent/dollar isn't cheap enough
Posted by: dashingdwl | Feb 29, 2008 11:23:30 AM
No matter how hard you hound a turnip, it will not bleed.
Posted by: Marcus Aurelius | Feb 29, 2008 11:28:11 AM
thanks Marcus.......great line.
Now to clean up my desk of coffee...
Ciao
MS
Posted by: michael schumacher | Feb 29, 2008 11:29:05 AM
...and that’s not all they walk away from:
Prediction: S&P 500 goes down 3%, commodities drop due to fear of a big move down and profit taking, stocks drop a few % more pulled down by weakness in commodity related stocks, global flight to safety leads to sudden strength in dollar with many dollar bears caught short, stocks drop further due to dollar strength, commodities drop further due to stronger dollar, margin calls lead to further drop in stocks, small bounce on speculation of inter-meeting rate cut, but quickly sold as bears don’t really fear the Fed anymore and with failure to recapture 1320, acceleration of losses into the weekend once 1305 is crossed, small technical bounce off 1275, but not substantial. Should be an interesting day.
Posted by: Michael M | Feb 29, 2008 11:44:20 AM
The youwalkaway IPO could be an indicator that we've reached the phase of Acceptance. The charming young woman in their ads will open the NYSE and be a hit on the talk shows. And Barry's blog will have record clicks because people will want to know if she gave him any stock tips in the Green Room.
Posted by: Roger Bigod | Feb 29, 2008 11:57:36 AM
LOL! Marcus, best line of the Day.
Posted by: John | Feb 29, 2008 12:06:11 PM
You had to figure someone would attempt to profit on this. Who is going to stay in a house where their paper losses may be hundreds of thousands of dollars within a year or two on an investment of hundreds of thousands of dollars.
Who wouldn't entertain solving their problem using this method rather than be enslaved to banks. For every action, there is an equal but opposite reaction............
Posted by: bdg123 | Feb 29, 2008 12:09:37 PM
May I quote Ludwig von Mises: :There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Posted by: JustinTheSkeptic | Feb 29, 2008 12:09:44 PM
Still laughing marcus
Posted by: Barley | Feb 29, 2008 12:12:11 PM
Oh, and look for credit card and auto loans to follow as they are a consequence of being "bundled" in with foreclosures.
Posted by: Pat G. | Feb 29, 2008 12:25:00 PM
You can expect to see alot of this:
http://creditboards.com/forums/index.php?showtopic=320401
Thinking about walking away from the house, can't refi our sub-prime adjustable in declining market
Talk me into or out of it -- I'm not sure. We owe $458k approx. on our current home, but the homes are falling so fast I can buy a newer home (2005) that's nearly twice the size of my current home that has 5br, granite counter tops, travertine tile, flagstone pool & spa, and many more for only $359.
In the meantime, my mortgage has reset 3 times, but the value has dropped $100k in just over one year. I can't refi, and I we are so frustrated we're ready to toss in the keys.
Calif. has no deficiency judgments, and the President has recently signed the law that eliminates paying taxes on that made-up income created by getting debt relief from dumping your home. We make enough income to qualify for a new loan, especially one for $100 less than our current obligations, and we can also rent our current home for close to the payments -- until they reset again!
Tell me where I'm going wrong? Should we continue to, as some say, throw good money after bad, or should we just hang in there and pray for something -- something that may never come?
I would love to hear from the mortgage gurus here on the board; I really appreciate all your input throughout all the forums here at creditboards .
Thanx
----Later, this poster reached a conclusion:
Thank you, everyone, for all the comments. It certainly brings up a lot of emotion, but personally, I don't feel any moral obligation at all.
Just because a party enters a contract, that does not make that party "morally" responsible to fulfill the obligations of that contract. Contracts are breached every single day of the year, and the very reason the law does not allow punitive or exemplary damages for a breach of contract action is to actually encourage someone to go ahead and breach a contract and pay the normal damages that flow from that breach. There's nothing moral or immoral involved; it's business, and in business, sometimes it makes much better sense to breach your contract and enter into another one.
The purpose of my original post was to solicit whether there were some unseen circumstances that I was just not seeing. Yes, we took out an ARM loan, and as it turns out in today's market, it was a bad deal. Two years ago or so, we would have already refinanced out of this loan and into something better.
However, I just happen to feel that I could breach the contract because the breach makes much better business sense for me and my family in today's market. As Cleaning_Credit mentioned, the values in Calif. are tanking, and tanking fast with no better outlook on the horizon. In my situation, I just couldn't see the real negative from purchasing a new home and then breaching the contract on the present one. I've learned here that the ding on a foreclosure is nowhere near the ding for a BK, and since we'd already be in a newer, bigger home at a presumably a better rate, we wouldn't be devistated by such a credit blow.
Again, thanks for all your input. I don't know what we will do, but the LIBOR rates are down, so there's actually a chance our rate could adjust downward if it stays or drops lower than where it is right now. Maybe that will force our hand one way or the other, and we should learn about that real soon :-0
Posted by: Mr. Obvious | Feb 29, 2008 12:25:43 PM
Isn't this emblematic of what has become of America....a bunch of spoiled kids binging on credit and the kindness of strangers..."expecting" everything to be given to them....feeling no sense of responsibility or accountability.
Whenver anything goes wrong, we seek to blame others. This "must" be someone's fault. It can't be my fault?!? Dot.com bust....go out and find people to blame...throw them in jail! Options backdating....this sounds bad!!!! Throw someone in jail. Subprime loose lending practices....there must have been some 'evil-doer' that caused all these problems...find someone to blame and throw them in jail!!!!
Posted by: Andy Tabbo | Feb 29, 2008 12:26:29 PM
cinefoz...do you still think that housing is going to "normalize" in the next few months? I still think we have a lot of shaking out to do.
Posted by: Mr. Obvious | Feb 29, 2008 12:28:12 PM
