What's going on here?

H/T Anti-Strib and Cold Fusion Guy. The New York Times reports that a trend in foreclosure is for people to simply pay about $1000 to a company called "You Walk Away", stay there a few more months without paying, and then simply walk away to their next abode, perhaps even without a stain on the credit report.

Now part of me wants to scream out something about Romans' admonition to "let no debt remain unpaid," and another part of me thinks "the guy's got a decent (but shameful) business proposition." Let me explain.

What's likely going on is that an enterprising group of lawyers licensed in many states (California's bar exam is recognized a lot of places) have gotten together a set of form letters that they can slightly modify (or their paralegals or even office assistance can modify) to send out to banks to handle the foreclosure arrangements. OK, but why should someone pay for this?

Well, most mortgages have provisions providing for remedy for the lendor to recover costs incurred due to foreclosure. Ordinarily, in a steady or rising market, that's taken care of by selling the home. In this market, they would most likely be taken care of via loss litigation.

Homeowners generally don't do well in these actions, but "You Walk Away" does something very simple; they promise to fight the action tooth and nail. By concentrating on this small area of the law, they end up intimidating lenders into settling a foreclosure without recovering their costs.

Scummy, but very clever. Hopefully Jim's employer squashes them like a bug. :^)