02 Mar Is Walking Away From Your House An Alternative To Bankruptcy?
There have been alot of reports for the last few weeks on a new company, “You Walk Away”. The company says that, with their help, distressed homeowners can “walk away” from their mortgages, homes, and suffer no consequences. Can this be true? The NewYork Times article by John Leland profiled the company in “Facing Default, Some Walk Away”. The Times did not come to any conclusions about the company, but offered explanations as to why such a company would come to be created. National Public Radio offered a different take on the company in their online article: “Why Not Just Walk Away?”
The company offers services such as a “protection kit” for $995. For that, they will send a letter that they say “stops lenders from harassing the homeowner.” The site also states that they will connect homeowners with a lawyer and account in order to discuss their options. They’ll advise people in the midst of foreclosure how long they can legally live in their homes, tempting people with the prospect that, “You WILL be able to stay in your home for up to 8 months or more without having to pay anything to your lender!” WHAT’S WRONG WITH THIS PICTURE?
1. Any lawyer will send a letter saying “don’t contact my client anymore, contact my office.” That fee will generally be far less than $995.
2. The same lawyer will generally tell you what will happen if you give up a home voluntarily or involuntarily (see, for example, my colleague Andy Miofsky‘s article on giving up a home in Illinois). AND, that lawyer will be able to tell you in five minutes or less how long you can stay in the home and what legal action the mortgage company is likely to take against you in YOUR state. And recommend an accountant to discuss the tax ramifications.
3. And all of the above most likely will not cost anywhere near $995.
The website has a “If you Qualify” section which precedes some of their claims, such as no obligation to your lender after the “walk away” and the removal of the foreclosure from your credit report. While some states do not allow for the mortgage company to sue on a deficiency balance (if the house sells at foreclosure for less than what you owe, that’s a deficiency. For example, Oregon does not allow for a mortgage company to sue a homeowner for any deficiency from a non-judicial foreclosure. OTHER STATES DO.) There is no legal way to remove correct information from a credit report, period. And a foreclosure, voluntarily or involuntarily, will appear on your credit report. (For a further discussion of how foreclosure or short sales impact your credit score, see my colleague Cathy Moran’s article.
The company uses marketing tools to attract the desperate–photos of families walking in the park, a “protection kit” logo which bears a remarkable resemblance to the Red Cross logo with a shield (to protect you) behind the cross–all designed to attract and comfort distressed homeowners.
So, if any lawyer could do what this company does, why the popularity of this company? Desperate folks think desperate thoughts and the internet offers instant answers (often wrong instant answers) to questions. Please, folks, go see an attorney in your area and find out the facts from someone who will be experienced in the laws of your particular state and who will be around next year when the fall-out from your ‘walk-away” is still falling.
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