A couple of Seattle Bubble readers sent news stories to me last week on a new company called You Walk Away (hat tip to Alan and synthetik.) This company, which is headquartered in California, is selling a how-to kit for $1,195 to help homeowners make the process of walking away from their home and the mortgage, as painless as possible.  Even the promotional pictures on the site display happy people who look like regular, ordinary homeowners….except they’re moving OUT of their homes and they look like they’re really, really having some good quality HAPPY family time.

[photopress:brighteyes.jpg,thumb,alignright]A long time ago, in a galaxy far, far away, most all mortgage lenders use to require a downpayment.  The reasons now seem obvious but even in a relatively stable housing market, when a person is putting some of their own money into the home purchase, that personal investment was seen as a good reason that could compensate for other reasons on why the lender said “yes” to the American dream for this particular borrower.  People use to think two, three and four times before walking away from a home when they would be walking away from their own hard-earned, after-tax dollar investment into the real property.  Those days went away with zero down, seller-paid closing cost loans.  One of the cards left that the lender is holding is a person’s credit history.  You Walk Away claims to connect you with their affiliated credit repair service so the borrowers can start repairing their credit immediately.

Then we had the 60 Minutes episode, “House of Cards” this past week interviewing a couple who had been advised to just walk away, which comes very close to legitimizing the practice: just stop making the payments, save the money, and live in your home until you absolutely have to move out.  Lender use to rely on the social stigma of foreclosure and the shame of walking away from one’s obligations. Now the logic of putting one foot in front of the other and walking away is starting to trump shame. 

So, what should homeowners do who are trying to make this decision?  I recommend finding a lawyer in your city that specializes in consumer protection or real estate law and paying for a face-to-face meeting to discuss all your options.  I will bet that in most cases, the cost of an attorney will be less expensive than the kit.  Google your state’s bar association to get started. 

Mortgage loan originators routinely give advice on how to repair your credit, and loan originators in most all states are only able to earn a fee when a loan is made, therefore this advice is given free of charge, as part of their ongoing relationship with you.  State laws on the foreclosure process such as your state’s Deed of Trust Act will also be available for you to read free of charge. To get started, just google it: “_Your State_ Deed of Trust Act.”  Also, non-profit housing associations provide FREE counseling to homeowners in default.  We all pay for this service by way of our tax dollars.  As a tax-paying person, I personally invite you to use these services if you need them and not to feel like this is only an option for someone unlike yourself.  To get started, visit Hud.gov and click on the phrase talk to a housing counselor located in the section “at your service.”  You’ll need to scroll through the list, and select an agency that offers “default counseling.”   What I would like you to avoid, because I care about you, reader-who-is-thinking-about-walking-away, is avoid the signs by the side of the road or any other person who appears to present themselves as an angel here on earth to rescue you, and promises something that sounds too good to be true. It is.  You are better off hiring an attorney.  Don’t have money for an attorney? See if you qualify for your state bar association’s free legal aid program.