Walking Away in New Jersey

Other than the hit to one's credit score walking away sounds so easy. Unfortunately it does not appear to be as easy in New Jersey as it is in other states. Their is a push that a short sale is better than foreclosure, but the process is cumbersome and may have just as big of a negative impact on your credit score. For those underwater their is no solution that is not going to be painful.

Sometimes just getting out heals enough pain to help the owner, soon to be former owner, able to keep getting by. That appears to be the feature story in this Sundays Real Estate section with an article titled When you can't go home again. We were pleasantly surprised to read a positive story regarding someones decision to leave their property. The article has lots of important information for those that New Jerseys' foreclosure mediation program can not or will not help. Lets take a look at the article -

[Sharon] loved the [Oakland] house where she had lived for 30 years and raised her children. But when she and her second husband, Bob, refinanced the house in 2005 to pay college tuitions and buy out Sharon's ex-husband's stake in the home, they unwittingly set off a chain of circumstances that would lead them to abandon their home and move into a rental little more than three years later. It was a $350,000 adjustable-rate, interest-only loan they had applied for over the phone.

"We started getting letters that our mortgage payment was going to increase by $600 a month come January of 2008," said Bob, who along with Sharon asked that their last name not be used. "And that payment was going to keep going up and up and up. I tried to refinance, but there wasn't enough equity to refinance."

...
Bob and Sharon's decision to abandon their home is not so extreme as those who walk away from houses worth less than the mortgage and mail the lender the keys. The couple hasn't made a mortgage payment in eight months or so, but the house is listed for sale, and Bob pays to keep the utilities on. He visits once a week to check on things and shovel snow from the drive and walkways.

...
There are few statistics on how many people abandon homes when they can no longer afford the mortgage payment and the house is worth less — often significantly less — than the mortgage. There are now a number of Web sites offering advice — for a fee — to help struggling mortgage-holders "walk away" from homes that are no longer worth the investment, sites such as youwalkaway.com, walkawayplan.com and mortgagedefaultlegaltrack.com.

...
"People try to talk about the homeowner's ethical decision and moral responsibility [to pay what he owes]," said [Jon Maddux, the CEO of the California-based Web site YouWalkAway.com]. "But banks look at it as a business decision. You have to do what's best for the survival of your family."

...
Bob and Sharon are relieved to be in their new home. They are paying their bills on time, and working to rebuild their credit. Sharon treasures a birdhouse, made by a friend's father, that is a replica of the home where she lived for three decades. Bob worries that there could still be financial repercussions, that someone might come and garnishee part of his paycheck to pay down the unpaid mortgage.

Relieved to be out from under the economic pressures of an ever changing ARM. Happy to have left a home that become a huge burden. Leaving the home and rebuilding the life is a fresh start that can help ease the pain and burden of the foreclosure. We are glad an article featuring people landing on their feet after foreclosure. Note that the morality is only imposed on the borrower side of the transaction. As the morality issue changes, and it will as the numbers of foreclosures rise, there will be little negative impact aside from hurt credit for those leaving an underwater property.

Finally, since the article was so long and involved different aspects of the walking away, foreclosures in the next post we will look at the credit score issue.