ORLANDO, Fla. – May 2, 2008 – Mired in confusion over mortgage and title situations, some homeowners are taking drastic steps to simplify their lives – including walking away from their homes.

As housing values fall and credit woes rise, more Central Florida consumers are turning to a process that lenders, credit counselors and foreclosure experts advise against. But even they understand why it can be appealing to homeowners.

“If you’re in good standing, you might as well talk to the wall,” said Orlando attorney Rick Franzblau, who handles foreclosure cases. “Until you stop paying, they won’t even talk to you.”

That’s bad news for borrowers who are frightened or want to be proactive. “They’ve tried to contact their banks, and the banks in many of the cases say they can’t do anything for them until they’re delinquent,” said John Maddux, co-founder of You Walk Away, a San Diego firm that helps people who don’t have much equity in their homes figure out how to leave their mortgages without doing too much damage to their credit ratings.

Walking away from houses is most attractive to people who live in places where housing prices rose most, such as California, Nevada and Florida.

“We’re only in about eight states, and Florida is one of the most popular,” Maddux said.

Business is booming. He and co-founder Chad Ruyle founded You Walk Away in January, and Maddux hopes the company will grow from 16 to 48 employees in the next three months.

Elizabeth Levensohn walked away from her Mount Dora home about six months ago – before You Walk Away existed – and says it was the best thing she has ever done.

She bought the house for just more than $100,000 a little more than two years ago.

“It was the only house I could afford,” Levensohn said.

At the time, it seemed like a good decision. She thought she’d be able to pay the mortgage on her salary as a school director at an Orlando church. Commuting wasn’t that expensive. The cottage was less than 700 square feet, just enough room for Levensohn and her daughter, Isabella, 12.

Within a year, she knew it was the biggest mistake of her life.

When she and Isabella were down to eating ramen and beans and rice, she knew something had to give.

She decided to walk away from the house and let it go into foreclosure.

Now she rents an apartment and lives a car-free – and, she said, relatively stress-free – life in Orlando.

Consequences of foreclosure

But as attractive as it seems to just let a house go, there can be repercussions.

First, the penalties can be frightening.

Mortgage lenders Freddie Mac and Fannie Mae have said homeowners who walk away from their mortgages will have to wait several years before they can qualify again.

And their credit ratings will be slashed.

“We discourage individuals from walking away,” said Emanuel Rivero, customer-service manager for the Consumer Credit Counseling Centers of Central Florida.

But even when they know the penalties, some homeowners consider walking away in their darkest, most helpless moments.

After they took out a loan for a renovation to their Orlando home, Travis Munnerlyn’s wife, Patricia, lost her job. They soon realized they wouldn’t be able to make their mortgage payments.

Munnerlyn contacted his lender, who told him not to send payments, the homeowner said.

But by the time his wife found work and he contacted his lender again, the couple’s financial situation had grown worse: The house was about to go into foreclosure.

“At one point, we were just going to pack up and walk off,” Munnerlyn said. “We had lost all the equity in the house already.”

But instead he doubled down.

“I sold my boat; I sold my gun; I took every penny out of the bank, even the change I had” to save the house, Munnerlyn said.

In the nick of time

As he wondered what to do next, Munnerlyn said he was told by a friend about services offered by the nonprofit housing-reform group ACORN, or Association of Community Organizations for Reform Now. He used the lessons he learned in workshops about predatory lending and foreclosures to renegotiate his loan at a fixed rate he and his wife can afford: 5.2 percent.

Robin Stout Migala, consumer-outreach manager at Freddie Mac, says she worries that troubled homeowners such as the Munnerlyns can sometimes fall prey to scam artists and end up signing over their homes without receiving any help in return.

That’s not unlike what happened to Lawrence Robinson and his wife, Darlene Hicks-Robinson, who wanted to take out a loan against their Orlando home to start a new business. Within days, they learned the company they had turned to for the loan had taken title to their house.

Trapped in a confusing he-said-she-said web of financial and title paperwork, they rushed toward foreclosure as they tried desperately to figure out what had gone wrong.

“We talked to practically every agency in the county,” Robinson said.

They sold two trucks and a piano, used money from their 401(k)s, sold their daughter’s car – but still ended up filing for bankruptcy.

Ultimately, Robinson was able to win back the title to his home in November and is working through the financial issues related to the foreclosure. He sold the house to a friend, and now he and his wife live in it as tenants.

Copyright © 2008 The Orlando Sentinel, Fla., Anika Myers Palm, Distributed by McClatchy-Tribune Information Services.

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