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
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?
It’s nice to see our entrepreneurial spirit is alive and well in America!
And the MSM is wondering why they’re no longer relevant. Sheesh.
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.
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
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.
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.
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.
“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!
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.
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.”
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.
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
No matter how hard you hound a turnip, it will not bleed.
thanks Marcus…….great line.
Now to clean up my desk of coffee…
Ciao
MS
…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.
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.
LOL! Marcus, best line of the Day.
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…………
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.”
Still laughing marcus
Oh, and look for credit card and auto loans to follow as they are a consequence of being “bundled” in with foreclosures.
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
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!!!!
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.
Call me crazy, but all the stuff going on with the economy is beginning to remind me of GW’s previous economic enterprises
http://tinyurl.com/2fnxe5
and subsequent failures–except this boondoggle is a tad bigger than his past exploits. Plus, of course, he may have a wee bit of trouble finding someone big enough to bail him out this time.
David Writes:
“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).”
My friend, you couldn’t be more correct!!!
I’ve posted a few times here talking about this epidemic. I’m telling you, it’s an oncoming tidal wave……..No gives a crap what happens to their credit score or the moral implications….It comes down to what makes the most financial sense for a borrower and his/her family. Period.
David Writes:
“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).”
My friend, you couldn’t be more correct!!!
I’ve posted a few times here talking about this epidemic. I’m telling you, it’s an oncoming tidal wave……..No gives a crap what happens to their credit score or the moral implications….It comes down to what makes the most financial sense for a borrower and his/her family. Period.
P.S. AGG, LOL!! Nice post
“… the values in Calif. are tanking, and tanking fast with no better outlook on the horizon.”
Is he talking about house values or moral & personal values?
We know the end game of lower house values but what is the end game for lower personal and moral values? That would cause economic pain like we have never seen.
There is a lack of moral leadership from business and gov’t. I am not talking about right wing Christian stuff, but just doing what is right for all involved and being able to look yourself in the mirror and say I did the right thing and did not screw anybody in the process to get what I wanted.
“… the values in Calif. are tanking, and tanking fast with no better outlook on the horizon.”
Is he talking about house values or moral & personal values?
We know the end game of lower house values but what is the end game for lower personal and moral values? That would cause economic pain like we have never seen.
There is a lack of moral leadership from business and gov’t. I am not talking about right wing Christian stuff, but just doing what is right for all involved and being able to look yourself in the mirror and say I did the right thing and did not screw anybody in the process to get what I wanted.
Its not that morality is on the decline. Actually, I would say the opposite is occurring. No matter what the media (ok, FOX would have you believe).
What is occurring is that many young Americans are fed up with up with lies, the spin, the half truths, the snake oil salesmen, the constant partisanship. Our society has become so distrusting of everything. And I mean everything. So little has NOT been tainted by corruption, greed, incompetence…etc…..I’m not delusional enough to say it’s never always been this way but with the advent of blogs and what not, the criminality has finally been brought to light.
I’m sure many of you will try and cut my head off for this next sentence (hey, the world needs douche bags too) but the reason why Obama is so popular is because he actually is trying to bring the country together (right or wrong) and provide the morality we’ve all been craving.
I’m not trying to do endorse Obama but rather, I’m just pointing out where the American psychy is. What the sixties was for social change, I firmly believe this decade will begin a consumer revolution. It’s every where you go. At the bar, in the resturaunts, at the movies, at the gym, on the net, in music etc. People are really fed up and horrified with what has become of our country. No one wants this place to be just another country. Clinton didn’t make it because she in the end is just another politician who will say anything just to get elected. The same fate will happen with McCain.
(In efforts of full disclosure, I’m not a repub. nor democrat. I’m a god damn American! I’ll vote for the most exceptional who can handle the job. Period.)
Its no longer about democrat, republican, morality or anarchy. What its about is the younger demo of the country (18-45) is sick and tired of the corruption. Wall Street, Oil co’s, the Gov, etc. are seen as intertwined (in cahoots). So when one defaults or walks way from their mortgage, they truly feel like they’re finally getting their chance to be just as ruthless as these entities (however misguided it may be).
My two cents. So, for all the schmuchs out there, go ahead and berate me. I’m just telling it like I ( and millions of others) see it.
“Buy ’em cheap (think 2 cents on the dollar) and hounding the borrower until you get something”
Quite a few borrowers will tell them to take a hike up to Pluto. If people walk away from a home, guess how well these zombies collectors will be received?
“Quite a few borrowers will tell them to take a hike up to Pluto. If people walk away from a home, guess how well these zombies collectors will be received?”
Posted by: Francois | Feb 29, 2008 1:11:43 PM
They may lectured by
THE LORD HUMUNGUS
http://www.youtube.com/watch?v=_TL4XZdyo3g
JUST WALK AWAY………
MarkTX-
I’ve had that scene playing in my head for a few weeks now…….The South Park version is just as good too…
BTW check that volume in C……..
Ciao
MS
All this talk of morality is quite amusing.
Why should the junkies/homeowners be worried about hurting the pushers/lenders by walking away?
Barry,
Walkaway is not only happening to homeowners, but homebuilders. In Scottsdale AZ…
http://www.azcentral.com/community/chandler/articles/0227cr-randal0228.html
Ask and you shall recieve…..
The “Butters” version
http://www.youtube.com/watch?v=ftygsWhsiY4
Even KCRW, a well known public radio station in Santa Monica CA, is reporting on the “You Walk Away.com” site.
The radio program called is called “To The Point” and can be found on the web at:
http://www.kcrw.com/news/programs/tp/tp080229the_housing_crisis_i
Burn baby burn – maybe I’ll finally be able to responsibly afford a home here in lala land.
Cheers & beers.
“Its not that morality is on the decline.”
Hog wash. My sense is that it is vanished, over, no longer present.
It is about “ME” and the greenback period.
Here is a good example – we had an accident at our home a little while ago and the Insurance Adjuster (yes those that act in the utmost good faith) assigned a company to do a “cost effective” program that put us in harms way even tho we questioned the program…our dog later died and to this day we worry about the toxins we inhaled and filled our lungs.
Morality my petard. I take a very singular side to all my affairs now. If it dont advance ME it aint worth my time.
Cold yes. But I sleep fine at night.
On topic: my 13 month old $1200 Bosch diswasher blew up last night – lots of smoke and the manufacture says tough tooty – the warrenty period is 12 months, and they told me to call an appliance service company. So I see my ME position is not so unusual after all.
BR: I like this blog. Thanks for it.
I’m gonna throw up.
This rationalizing and trivialization of morality is not an abstract philosophical exercise.
The financial system that keeps us all from being cave painters is based fundamentally on trust. We’ve all been screwed some time or other. That’s the exception that proves the rule.
If your word is no good, you are weak, you are a parasite, you are a victim.
Sleep on that.
Look in the mirror.
Walk away all you want.
You’re still there.
PS. The “for my family” thing made me laugh.. it’s a classic.
The washing machine rationalization was awesome… very creative.
PPS. I’m not a professional lender. When I have lent money, I’ve always been paid back, with interest. I was not surprised. I was not grateful. That was the deal.
>>>When I have lent money, I’ve always been paid back, with interest. I was not surprised. I was not grateful. That was the deal.
When a loan is originated in CA on a home purchase the deal is you don’t pay we get the house, the house period. Thats the deal if the lenders made a bad deal so be it thay get their houses period. This is a business arrangement similar to your lending arrangement exept your contract didn’t stipulate the only recourse you had was the collateral for the loan.
>>>When I have lent money, I’ve always been paid back, with interest. I was not surprised. I was not grateful. That was the deal.
When a loan is originated in CA on a home purchase the deal is you don’t pay we get the house, the house period. That’s the deal if the lenders made a bad deal so be it they get their houses period. This is a business arrangement similar to your lending arrangement except your contract didn’t stipulate the only recourse you had was the collateral for the loan.
People are being trained to see that business is business, it’s neither moral nor amoral it is the fabric we have woven, the disconnect between business and society. When Clinton signed off on Graham Leach, it became known as financial innovation.
Different as is widely known isn’t always better this we are beginning to see. Any one naïve enough to believe this was an accident, the intentional inflation of the core asset of the citizenry while the sitting administration actually restrained efforts by state regulators to reign in on the fraud is in for a rude awakening. Every one of these dollars lent into existence has debased the value of your savings. The morality issue is much further askew at the top of the pyramid than at the base.
The honest homeowners and borrowers are out of luck. We played by the rules and now our homes are worth a lot less than we bought them for. Why? because the lenders were soliciting high risk borrowers in order to make money on home loans.
I am now lumped in with the worst of the worst homeowners. I put money down, did a full documentation loan , and I find out how widespread this corruption is. My home is worth 75% of what I bought it for and is expected to decrease another 15%. Will it recover? yes eventually but paying for this mortgage makes no sense to me any longer. Houses in my neighborhood are in decline and look like crap. I won’t be able to break even in this situation for a long time.
Why would lenders make these loans? I am walking away. It makes no sense to be the honest homeowner in my case. I am paying for the lender’s greed and lack of responsibility.
In California I will WALK AWAY without a deficiency judgement and no tax consequences . I am doing everyone a favor. This will force the weak shady lenders out and make it harder for undesireables to get loans..
This is America and you have to take care of number 1 first.. f_ck all of this morality B.S. Where was the morality from the lenders, appraisers, RE Agents? Heck Wells Fargo used to send emails out to their appraisers saying they needed “x” amount on an appraisal and the ones that played ball got the business.
http://www.youwalkaway.com is only giving advice.