More stressed homeowners 'walking away' from mortgages

CLEVELAND -- Northeast Ohio part of a growing national trend in which homeowners in danger of being foreclosed upon simply walk away from their houses.

As attractive as "walking away" may appear, Cleveland organizations who work to prevent foreclosures say it is not the right choice.

"Don't do it," says Mark Seifert, Executive Director of ESOP, which has been assisting distressed homeowners for more than 15 years.

"If you walk away, we can't help you," he explained. "We can only help owner-occupied properties, so no matter what the bank tells you, or no matter what the stress is at night, do not walk away."

People considering walking away are those who have seen the value of their home fall to less than they owe on their mortgage. Many are in bust-and-boom housing states, like Florida and California.

Jeff Horton is a Florida homeowner whose house is now worth about half of the $255,000 he paid for it three years ago.

With the help of an online service called YouWalkAway.com, he is going to mail in his keys and suffer the credit hit walking away will bring him.

"Why would I continue to pay all this money every month, and cut back on the things that I enjoy doing," Horton told NBC, "just to make the payment when there's catastrophic negative equity in the house?"

Horton said he was willing to have his credit ruined for the next several years. He intended to use the money he used to pay on his "underwater" mortgage for rent on a comparable house.

But ESOP's Seifert says, in circumstances like that, homeowners who walk away are still liable for the mortgage, the taxes, and all the liability that accrues until their home is officially foreclosed.

He says a small percentage of ESOP clients have been able to secure a Deed-in-Lieu of foreclosure, in which the homeowner loses the house, but the lender forgives the loan.

It allows the former homeowner to get a fresh start without their credit being completely destroyed.

Seifert says Cleveland area lenders have been slowly warming to the idea of the Deed-in-Lieu as one option to a standard foreclosure.