Paperwight has a good, linkful post up about the phenomenon of homeowners walking away from crushing debt, otherwise known as acting rationally in our brave new world of unregulated markets:
Mission achieved! This is what it looks like. Companies walk away all the time. Just ask those workers who lost their pensions when their company went bankrupt. Or the former employees of almost the entire American heavy manufacturing industry. Social obligations to continue to pay a mortgage to a giant corporation that would happily screw you first chance they get by, for example, buying a change in the bankruptcy law to rewrite existing contracts in the corporation's favor? Get real. This is business.
That makes this NYT article an absolute hoot to read. In addition to the "what has become of the American homeowner" agonizing we've grown used to reading, it introduces us to a new player in the game: You Walk Away and more agonizing:
When Raymond Zulueta went into default on his mortgage last year, he did what a lot of people do. He worried.
In a declining housing market, he owed more than the house was worth, and his mortgage payments, even on an interest-only loan, had shot up to $2,600, more than he could afford. “I was terrified,” said Mr. Zulueta, who services automated teller machines for an armored car company in the San Francisco area.
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.
Beautiful, n'est-ce pas? Pigs need food. Engines need coolant. What's not to love? The market to the rescue! Except not everyone feels that way:
Consumer advocates and others question the value of You Walk Away’s service.
“We are more interested in servicers and borrowers coming to mutual resolutions through loan remediation,” said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition. “Even though we are not seeing good outcomes, we’re not willing to throw up our hands and say people should walk away from their homes based on the advice of a company that stands to profit from foreclosure.”
The horror.
Comments