You Walk Away Customers Report Less-Than Expected Negative Impact to their Credit and Ability to Rent after Foreclosure

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Misinformation abounds regarding the effects foreclosure has on credit ratings

After conducting nationwide exit interviews with people who had strategically defaulted on their home loans, YouWalkAway.com, a leading foreclosure agency that helps people navigate through the foreclosure process, found that 81 percent of respondents had no problems renting after foreclosure and 82 percent reported that they did not have to put down a larger deposit when renting.

The data compiled by YouWalkAway.com supports the increasingly popular idea that foreclosure is an acceptable financial planning strategy.

Anecdotal reports from property management firms support the YouWalkAway.com findings. Owners and managers of rental properties regard the influx of renters in the market due to the housing market meltdown as a boon, and many are willing to accept that potential renters may not have credit scores as high as landlords previously would have required.

“Rental applicants with a foreclosure are now accepted with the proper documentation,” says Tony A. Drost, MPM® RMP®, president of the National Association of Property Managers and owner of First Rate Property Management in Boise, Idaho. “In fact, a former homeowner with a foreclosure is one of the best tenants. They know how to keep up and care for the home since they have previously cared for one.”
Similarly, John Bradford, owner of Park Avenue Properties in North Carolina, states, “We are seeing a slight increase in applicants with foreclosures, and our owners are typically open to renting to those applicants. Poor credit, caused by a foreclosure, has very little to do with having overall good citizenship, and if the other credit history is reasonable outside the foreclosure, then the applicant should be considered, possibly with other requirements like an additional month’s deposit. In the end, a credit score is just one factor in a balanced score card approach.”

The YouWalkAway.com findings are consistent with a study of a Federal Reserve Board finance and economics discussion group issued in May of this year that reported, “Although foreclosure considerably raises the probability of moving, the majority of post-foreclosure migrants do not end up in substantially less desirable neighborhoods or more crowded living conditions.”

Reports from YouWalkAway.com customers indicate that even credit scoring agencies appear to be easing standards for assigning credit scores. YouWalkAway.com customer Susan Edwards had a credit score of 805 before walking away from her Southern California home. After missing her fifth mortgage payment, her score dropped to 680. Three months following the foreclosure auction of her property, her score was up to 734. A “good” credit score falls between 720 and 749.

“It was commonly reported that the average foreclosure would lower your credit score about 150 points,” said Edwards. “I had assumed it would stay in that range for up to seven years. I was wrong."

Jon Maddux, CEO of YouWalkAway.com, says that misinformation abounds regarding the effects foreclosure has on a person’s credit. Maddux’s company has supported more than 6,000 people to prepare and strategically navigate through the foreclosure process since its founding in 2007.

“More often than not, it is those who have an agenda to deter homeowners from walking away who use scare tactic phrases such as, ‘Foreclosure will destroy or decimate your credit,’” Maddux said. “Due to the nature of how credit scoring works, I prefer to describe the effects of foreclosure as wounding one’s credit. The wounds will heal as long as the borrower continues to keep other lines of credit current."

Borrowers who opt for a short sale have seen quick restoration of their credit as well. San Diego real estate broker Jeff Grant can attest to his credit recovering after a short sale of his investment home, which was upside down by more than $200,000. “After my own short sale, missing a total of eight mortgage payments, my credit went from 729 to 679, but it quickly recovered to 728 a year and four months later,” he said.

New York resident and YouWalkAway.com client Jodi Romanello has walked away from two investment properties in Florida. Romanello has yet to see any negative repercussions of a credit drop and maintains high borrowing limits on many of her credit cards.

"When I first skipped payments on my first foreclosure, CitiBank Diners Club abruptly canceled my card due to 'undesirable changes in my credit rating,'" Romanello explained. "I got very upset because I hadn't thought this would happen, but to my enormous relief none of my other cards did this. I have a high limit with American Express Gold, Visa, MasterCard and a lot of store cards, and Amex just renewed my card with an invitation to go Platinum."

To help their clients restore their credit ratings, YouWalkAway.com has added a new product designed to allow clients to monitor their credit throughout and following the foreclosure process. Credit and identity protection is also available with real time alerts.

“Closely monitoring your debt and other credit, paying all other bills on time and paying off your credit card each month are all important steps to take toward rebuilding your credit after defaulting on your mortgage,” Maddux advised.

About YouWalkAway.com
Located in Northern San Diego, Calif., YouWalkAway.com is a foreclosure agency run by a team of real estate and legal experts with more than 50 years of combined experience. Featured in a wide range of reputable and powerful media pieces, YouWalkAway.com is acknowledged for being a trustworthy and valid foreclosure resource agency and the nation’s foremost authority on foreclosure laws and consequences. It is the objective of YouWalkAway.com to empower homeowners who purchased their homes at the peak of the real estate market to take control of their financial future. http://www.youwalkaway.com

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Bethany Branscum

Jennifer Whitelaw
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