The truth about walking away from a mortgage

For those who think walking away from a mortgage is the easiest route to start over again, a Time magazine article has some important details:

Nearly 9% of all U.S. mortgages--or 4.8 million loans--are past due or in some stage of foreclosure. So when a company claims to offer distressed homeowners both relief from their mortgages and revenge against the bankers who saddled them with too much debt ("Give the lenders back their own headaches"), there are plenty of people eager to hear more...

Walking away is a popular phrase these days among real estate pros and ex--mortgage brokers looking to capitalize on slumping home prices and rising delinquencies. It sounds so liberating, but what does it mean? That foreclosure can be a good thing?...

The whole idea of walking away is troubling to consumer advocates, who worry that these firms are whitewashing the fact that foreclosure is a traumatic experience--both financially and emotionally--that takes years to recover from...

What is real--and what is very much downplayed by these outfits--is how completely a foreclosure wrecks your finances. Near term, you might get slammed with a massive tax bill, since forgiven debt can be subject to income tax. Long term, car loans and--you guessed it--home loans will be much harder to come by. How's that for walking away? "This is the American Dream ended in disaster," says Odette Williamson, a foreclosure lawyer at the National Consumer Law Center.