Walk Away From Your Mortgage: A Good New Beginning?

Christy Annis, who lives in a condo in the Atlanta area, got her law degree and spent 12 years in corporate America. She lost her job in June 2009 and decided it was time to reinvent her life by starting a business that packages black-eyed peas and makes jewelry. Her decision to make a major life change is not unusual. But her approach, which involved stopping payments on her mortgage, puts her in a small but growing group of homeowners.

Did she do the right thing?

Frustrated by job losses, underwater homes, and unwieldy mortgage modification programs, more and more homeowners are crafting their own mortgage modification programs. These programs, which do not have the approval of lenders, involve paying nothing more and using the time till they get evicted by the bank to create a Plan B.

Annis says she'd like to keep her condo, but just doesn't have the money to pay the mortgage on her unemployment check. Her career in law was her parents' dream, and she was never happy working in that field.

At first, Annis tried to save her home by working with the bank when she first lost her job last June. She entered a loan modification program and the bank lowered the monthly payment on her 6.75 percent mortgage from $1,600 to $1,300 with the promise of a lower interest loan. CitiMortgage gave her time to find a job before doing the full paperwork for a modification. When she still hadn't found a job by September 2009, the bank agreed to another extension at $1,000 per month with a reduction in interest rate by 2 percent.

Annis says each modification took about 50 phone calls.

She claims she'd keep making calls until she got someone on the phone who would give her the answer she wanted. "Most of the people who answered the phone knew less than I did about the process," Annis says. "Working on loan modification is itself a full-time job."

She kept making payments and waited to find a job, but with no success finding work by October 2009 she started planning her own business. Finally in May, she stopped making payments and is waiting for a default notice. Annis says she has been told it will take about four months before she'll get one.

Today she is running a startup business called Peas for Prosperity and not worrying about her mortgage. While waiting for the ax to fall, Annis is putting time into building her business. She hires homeless people to do the work.

Annis sells the peas in one-pound bags with a recipe and gives a portion of her profits to charity. Her jewelry is made from newspaper and other sustainable materials. The money she's no longer paying into her mortgage is now being used to pay a business coach to help build her business, design packaging and prepare the promotional materials -- as well as to hire sales representatives when the new packaging is ready. She also used the funds to build her website.

If she can get the business off the ground, she'd still like to save her home even though she paid $228,000 two years ago and its current market value is $150,000.

Joe Sale, who owns a townhouse in the Tampa area and lost his job in August as an account executive with a Fortune 500 company in August 2009, is less sentimental about his home. He bought it about four years ago for $230,000 and put in another $20,000. Today, similar homes are listing for $130,000.

Since he financed almost 100 percent of the purchase price, he doesn't have much to lose. He settled with the bank that held the equity loan for $3,000 of the $40,000 owed. He'd prefer to work out a deed in lieu of foreclosure, but so far the bank has not answered his pleas.

Sale has received notice of an auction on Aug. 10 and just wants the process to be over with so he can move on with his life. "I can't wait to get out of it," Joe says. He just wants to rent and "wait until the market recovers."

Meanwhile, Joe focuses on building his necktie business, called Anchor Neckware. He developed the product in his spare time while still employed. His unique design allows the user to attach the tie to two buttons on a shirt and keep the tie in place. He also includes a pocket in the tie that can be used for credit cards, cash or an iPod. By December 2009 he had manufacturing set up and he launched his new website in May.

Neither bank involved with these two homeowners wanted to comment on their cases.

The number of people who are choosing not to pay their mortgages continues to rise. LPS Applied Analytics, which provides services and data to the mortgage industry, reports that on average delinquent borrowers wait 438 days to be evicted. That's up from 251 days in January 2008.

There are definite risks involved with walking away from a mortgage, including the potential for damaged credit scores and paralyzing guilt. But at this historic moment, some homeowners are willing to take those risks for a shot at a second chance. For them, the biggest risk is not doing anything.

Lita Epstein has written more than 25 books, including "The 250 Questions You Should Ask to Avoid Foreclosure" and "The Complete Idiot's Guide to Personal Bankruptcy."
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