Special Guests: Chad Ruyle - YouWalkAway.com Co-Founder
NEIL CAVUTO, HOST: A follow-up to a story we touched on Fox News earlier today. A "New York Times" story homeowners who are simply walking away from their mortgages. They were underwater and now they are better off.
In an article a company called youwalkaway.com was cited, the organization that walks folks through the process while walking away through their mortgage.
Chad Ruyle is the co-founder of that company. Joins us right now.
Chad, the tone of the article, not necessarily you per se, that you can walk away from obligations. I just worry if everyone did that, we would be in a heap of trouble, don't you think?
CHAD RUYLE, YOUWALKAWAY.COM CO-FOUNDER: Well, I mean they're not walking away from an obligation. They're following the terms of the contract with the lender. I mean, there is certainly an issue of the social implications of people walking away.
It affects the property values generally, but each one of those homeowners has to think about, you know, what is best for them and their family in making that decision.
CAVUTO: Yes, but think about it, Chad. If everyone who was underwater or under some duress just decided, the hell with it, I can't bear this and all did it at the same time. You could stop making payments to expedite the foreclosure process. You could be expediting a real estate meltdown beyond the likes of which we have had already.
RUYLE: Well, you know, people aren't just going to flood the market and be foreclosing the next day, but what --
CAVUTO: Your site -- your site is a hit, young man. I mean, you know it supply as need --
RUYLE: It has been for four years. So if that the case we would have seen this happen.
CAVUTO: You're responding to a need. That's fine.
RUYLE: Yes, sure.
CAVUTO: I'm saying the message inherent in this "New York Times" article today is that, few chair for those who dodged a financial bullet.
RUYLE: Yes, I mean, you know, you mentioned who is left holding the bag. It is really the bank. You know, if we follow people's idea that these homeowners have to continue making their payments no matter what the cases, we continue privatizing the gains and socializing the losses.
CAVUTO: Yes, but you're saying it is the bank stuck with those losses. Let's say it is your bank, Chad. Let's say a lot of people keep doing what you're encouraging and your bank is feeling the pinch and it is on the precipice because of all these folks defaulting. Then it is our problem, right? And then if there is taxpayer rescue, it very much is back in our lap, right?
RUYLE: Well, if you look at it getting back in our lap based on the bailout money, the bailout money was to be used by the banks to continue the credit lines to be open and to lend to homeowners and they haven't been doing that.
So again, it goes back to the bank is creating the problem. I don't disagree with you that there's a social implication of people walking away from their home. It causes, you know, additional bailout.
It causes properties within someone's neighborhood and just generally going down in value. So it does affect us as a whole.
CAVUTO: How quickly the people rebound. If this article is accepted at face value, the one guy, normally you bail out your credit score collapses. This one guy was getting a credit card months later.
I guess what concerns me is, there are no stigma attached anymore to walking away from your responsibilities? You might technically cite contract law. I understand what you're saying, but the end result is, no mas, I'm walking out.
RUYLE: Well, you have to look at this differently than a student loan or a credit card debt, a home loan --
CAVUTO: That is interesting. The student loan debt that too is going to be forgiven. That too will be bailouts. You see what it feeds and breeds?
RUYLE: No. It's a totally different type of loan because there is collateral on the property. It is based on an agreement with the bank.
RUYLE: Student loans, I agree with you. I don't think we should all of sudden go down that slippery slope say, OK, student loans could be forgiven. You can go through bankruptcy and still not have student loans forgiven.
The reason being, banks are willing to lend to the students because of those laws. If you take away those laws, it stops them from giving those loans. And the reason student loans have that securitization even through bankruptcy because there is no collateral.
The bank doesn't get anything in return. With a loan on a home, the banks are willing to do it because if they default, they're taking, you know, the position that that property will have enough value that it is worthwhile for them to do that. So I see it as a different type of loan.
CAVUTO: All right.
RUYLE: You know and I think --
CAVUTO: I'll give you last word. Go ahead.
RUYLE: Well, you know, the there are penalties that people would pay, like if you're in a cell phone contract.
RUYLE: You have to pay $200 to get out of your two-year contract to switch carriers, you're breaking contract there. But majority of viewers will say absolutely I'll pay that $200 penalty. I will move on and I'll get a better carrier. These homeowners make that decision. They're going to pay a penalty. Their credit will be affected, but they're willing to do that to move on and get into a better financial position.
CAVUTO: All right, Chad, thank you very much.
RUYLE: Sure, thank you.
CAVUTO: All right, well, not just the rich fighting the Occupy Wall Streeters. Now it is the poor.
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