Mar. 1, 2008 -- A new service offers to help millions of Americans facing foreclosure walk away from their mortgages -- but not without consequences.
With the Dow Jones Industrial average dropping by more than 300 points Friday, and the economy on shaky ground, Americans appear to be turning more to their credit cards.
According to "USA Today," a new trend shows that a growing number of consumers are paying their credit card and car bills first, a sign that many cash-strapped homeowners are giving up trying to stay current with their mortgages.
In response, new consulting services are popping up, marketing a get-out-of-debt solution to homeowners who cannot afford their mortgage payments.
YouWalkAway.com is one such service that has helped more than 200 homeowners in six states who entered a little, or no- down, "creative financing" mortgage.
The company offers legal advice and tries to help clients get foreclosure off their credit.
"We help them through that process so it's a comfort level for them but also very practical," says Chad Ruyle, a principal at YouWalkAway.com.
But is it really as good as it sounds?
For people like Eddie Zepeda, who bought his home in the San Diego suburbs in 2004 and now can't afford his $3500 monthly mortgage payment, YouWalkAway.com has helped.
"It's either paying my bills and buying food for my kids or sending my mortgage in and I can't. I can't break even," said Zepeda.
In reality, walking away can still have serious ramifications on a borrower's credit that can last for years. But many are willing to take the hit now and pay the consequences later.
"Not a smart decision for a person's long-term financial well being … I think it's a smart decision only if that person can conceive of no way possible that they would be able to over time, nurse their way through their current mortgage obligation," said Michael Santoli, an editor for Barron's magazine.
There are signs the government is cracking down on some of these services that claim to help consumers. The Federal Trade Commission announced yesterday it had charged six businesses for allegedly enticing homeowners into short term, high-cost loans by securing additional mortgages on their homes.