Walk Away Newspaper Article

[The Professor]

This article appeared in today's Sacramento Bee. I'm not the author, but it sure sounds like what I've been suggesting.......

Home Front: Advice to walk away from loan draws fire
By Jim Wasserman
Published: Friday, Dec. 26, 2008 | Page 5B


No apologies, says Ruben Ramos, owner of a real estate office.

"If people don't think it's a reality, they better wake up."

Ramos got attention in real estate circles this week after explaining in Sunday's Bee how he encourages troubled borrowers to walk away from their homes.

His comments – during a real estate round table with three other panelists – went off like a bomb in an industry that constantly tells people to hang in and try to save their homes. In real estate, "walkaways" are not to be acknowledged publicly, let alone encouraged.

But they've become a frightening reality.

"There are a number of cases where that is the only option available," said Ramos. He explained in detail how he counsels borrowers to get maximum free months in the house and cash from lenders while they plan their exit.

"Pocket the money you're saving," he said. "Call me 25 months later, I'll put you in a nice home."

Ramos said it's not the end of the world when homeowners walk. They can get a new government-backed mortgage in about two years.

Home Front heard from readers "astounded" to see such raw advice in print. Others called it outrageous.

"It's not the right thing to do. I wonder if this is what we want taught in our colleges, to defraud lenders," said retired Sacramento homeowner John Lewis.

Leigh Rutledge, a Sacramento real estate agent, said, "There was part of me that thought The Bee shouldn't have printed it. The other part is that as a Realtor I'm incensed that this guy … that this is what people think of us. It's not how most Realtors feel."

To be fair to Ramos, another dialogue on the topic was edited out for space. He talked about working first with banks to get loan modifications. If the bank is willing, give it a try, he said. If not, leave.

"If I see that the modification only benefits the lender by keeping that borrower on the hook and slamming the door harder in their face two or three years further down the road, I'm going to be the first one to say, 'Walk away.' "

Some in the business said Ramos invited trouble with his remarks. But he cited the trouble that borrowers face.

What are they to do, he asked, when Congress passes Hope for Homeowners – to help 400,000 U.S. borrowers get principal reductions – and 10 weeks later it's called a failure, with just 312 applicants?

Ramos told another long story about a client in Williams who got a risky subprime mortgage that reset to an unaffordable payment in two years. When the man went to refinance, he was given "one of the worst loans in the market, and they stiffed him for $14,000 to $16,000 in loan fees."

He was one of the first Ramos helped walk away.

"I stand by what I said," he said. " I stand by it 100 percent."

Be cautious in seeking help

Firms claiming they can get your troubled loan modified are now leafleting neighborhoods.

Maybe they can help. But be careful about paying in advance.

The state Department of Real Estate says: The firms are not allowed to collect fees in advance if your lender has issued a notice of default against you (after you have missed three or more monthly payments). It's state law.

If you aren't yet in default, these firms may charge you in advance. Also, remember that many nonprofit loan counselors do the same thing for free.

Low rates drive refinancing

The refi boom is on. With 30-year rates averaging 5.14 percent early this week, according to Freddie Mac, most mortgage applications are for refinancing. (Rates were jumpy later in the week, but trending up a little, according to other sources). The Mortgage Bankers Association pegs the refinance share at 83.2 percent.

Mortgage brokers are happy, but also frustrated. Some say borrowers are "locking in" rates and breaking the deal in days to lock in lower. That's an expense for brokers.

A time to cherish our homes

Finally, a thought about the holidays, when our homes take center stage. It's a time of year when we've wrapped our houses in lights, like big colorful ornaments in themselves.

Our kids come home to live again for a few days inside houses where they grew up. The big holiday movies stress the importance of home and the families inside them. Outside it's cold and inside is the warm glow of the house and the people who live there.

Our houses are a focal point for parties. We invite our friends in. We make cookies.

Enjoy yours and think about how lucky you are to have one.