Walkaways

Jingle mail:

Foreclosure used to be a last resort, something that hard-pressed homeowners would scrimp and plead to avoid. But as the subprime lending crisis sweeps up millions of borrowers nationwide, some are deliberately choosing foreclosure as an early option.

As their home values tumble and their mortgages rise, these "walk away homeowners" decide to cede their houses to their lenders.

"It's throwing good money away after bad" to pay an escalating mortgage on a home that's plunging in value, said Army Sgt. 1st Class Nicklaus Skaggs of Vacaville. He and his wife, Tishara, stopped paying their mortgage in February. They signed up with a new company called You Walk Away to help guide them through the multi-month foreclosure process.

The couple paid $455,000 for their Vacaville home almost three years ago, shortly after Nicklaus Skaggs returned from a year in Iraq. Now the home's value has dropped to $290,000. Their adjustable-rate mortgage, which started at about $3,000 a month, has reset twice, climbing to about $4,000.

...Walk-aways represent a profound shift in American attitudes toward homeownership - a shift that may have begun with the no-money-down subprime loans. People who don't have "skin in the game" - their own cash on the line - feel less attachment to their homes. People who bought homes expecting rapid appreciation may be quicker to dump them when they don't perform as expected.

The walk-away phenomenon is common enough that mailing in one's keys to the lender has earned its own nickname: jingle mail.

In California, purchase mortgages on residences are "nonrecourse," which means lenders cannot pursue foreclosed homeowners for additional money.

It is clear that many borrowers cede their homes without asking their lender for a break. More than half of foreclosures involve people who never spoke to their bank, studies show.

...But some financial experts, such as "mad man of Wall Street" Jim Cramer, say walking away makes economic sense.

"When your house drops 20 percent in value ... it's better to walk away, even if you're wealthy," he said on TheStreet.com TV last summer. "Because you don't want to lose your credit card and you don't want to lose your car. Your house is the one thing that's fungible. It's smart to walk away."

...You Walk Away (youwalkaway.com), based in San Diego, began in January to assist homeowners who want to let their homes go into foreclosure.

"What if you could live payment free for up to 8 months or more and walk away without owing a penny?" its Web site asks prospective customers. "Unshackle yourself today from a losing investment and use our proven method to Walk Away."

...Maddox said 70 percent of his customers are financially floundering, while 30 percent made an economic decision to walk away.

"They don't care about their house anymore," he said. "It's a big weight around their neck. They're trying to get out of it and get their heads above water again. They're paying too much for the title of homeowner."

...Some homeowners are sufficiently savvy - and brash - to try to turn the housing meltdown to their advantage.

A Discovery Bay man who asked not to be identified said he is "upside down" on his house by about $260,000. Instead of bemoaning the situation, he plans to capitalize on it.

"I refinanced a couple of years ago and pulled out $100,000 and put in a fabulous pool," he said. "Now I've got this fabulous pool and fabulous house, but it's not worth anything. Why shouldn't I be building equity over the next four to five years instead of playing catch-up?"

The man said he has not made a mortgage payment for five months.

"I'm playing the bank game," he said. "I'm playing chicken with them. I already got them to agree to put (the unpaid) payments on the tail end of the loan. What I'm really pushing them to do is to (adjust my mortgage) for the current market value and write off the rest. I'd love (to have it) lopped down to a $450,000 basis rather than $710,000."

If the bank won't negotiate, he'll walk away, the man said.

That kind of story sends chills down bankers' spines. To date, most loan modifications have involved freezing interest rates or repayment plans for arrears.