February 29, 2008

More Props to The New York Times

Better late than never:  The New York Times is finally starting to get it with regard to the housing crisis.

On the heels of this week’s story about opposition to government bailouts for people losing their homes comes this story about a company called You Walk Away, which helps people walk away from their upside-down properties. The piece contains some cogent insights, including:

In an era in which new types of loans allowed many home buyers to move in with little or no down payment, and to cash out any equity by refinancing, the meaning of homeownership and foreclosure have changed, economists and housing experts say.

And this:

The value of homeownership, then, has increasingly shifted to the home’s likelihood to rise in value, like any other investment. And when investments go bad, people tend to walk away.

And walk away they will, says Christian Menegatti, lead analyst at RGE Monitor:

 When homeowners see houses identical to their own selling for much less than they owe, Mr. Menegatti said, “I wouldn’t be surprised to see five or six million homeowners walk away.”

Among them will be Bay Area resident Raymond Zulueta, who paid San Diego-based You Walk Away $995 to help him through the foreclosure process.  The story said he feels guilty, but he’s getting over it.

“I know in a few years my credit’s going to be fine. If I want to get another house, it’s going to be there. I’m not the only one who went through this. I know I’m working the system, but you got to do what you got to do. There’s always loopholes.”

Lenders have nobody but themselves to blame for all the homes they’re going to be saddled with.  Giving people like Mr. Zulueta the ability to buy homes with little or nothing down practically guaranteed a slew of bad loans if the market tanked.  The homebuyers were dumb, but bankers are professionals — the people we trust to handle our money.  Great job!

But kudos to The Times for getting to the real story.

Recent Redfin posts:
Are These People Nuts?
L.A. Area Hit with Steep Price Decline

---