There has been plenty of attention given lately to the idea of the so-called "ruthless default" -- hat tip goes to Tanta at Calculated Risk here -- which says that borrowers are becoming increasingly more likely to simply walk away from their mortgages, even if they may have the ability to pay or otherwise have other workout options available to them. Call it jingle mail. Call it the mortgage put option. Call it what you will, but mortgage lenders are becoming increasingly concerned over bad borrower behavior. Countrywide, for example, said in a recent letter that went with new "soft market" policies that "mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay." It's the "economic interest to repay" that's now got the industry's attention. And for good reason: it's yet another factor prepayment and credit risk models haven't accounted for. Consider the case of You Walk Away LLC -- a counseling agency (I'm using that term very loosely here) dedicated to helping (I'm using that term loosely here, too) borrowers walk away from their mortgage debt obligations. From the company's Web site:
Is Foreclosure Right For You? Ask Yourself ... Are you stressed out about your mortgage payments? Do you have little or no equity in your home? Have you had trouble selling your house? Is your home sinking under the waves of the real estate crash? What if you could live payment free for up to 8 months or more and walk away without owing a penny?
There's the inanity of paying this company $995 for a "walk away plan," for one -- a "kit" that instructs borrowers on how to game the foreclosure process. There's also the thought that this "counseling agency" has no interest in helping borrowers -- whether troubled or not -- understand their options, but instead suggests that borrowers drive increasingly greater losses for lenders, while ruining their credit in the process. The company says it's helping "homeowners who purchased their homes at the peak of the real estate market to take control of their financial future." A sign of the times, indeed.