Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys back to lender)

Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys back to lender)

The issue is the stability of our economy, and our ability to recover the value of our homes, salvage the lifestyle of our neighborhoods and deal with the blame issues later through appropriate regulations.

Mortgage Lenders, with full authority from the investment bankers, mortgage aggregators, and investors, MUST take the lead and become proactive, even aggressive in heading off this disaster without regard to who is to blame. 

The plain fact is that if they don’t act NOW the losses will mount for everyone, more jobs will be lost (including at the top of these mortgage enterprises), more houses will go into inventory, more downward pressure on housing prices, more vacant, abandoned, vandalized houses. 

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It is an obvious option that costs virtually nothing and with the number of people losing their homes skyrocketing, the stigma is virtually gone. You have a $3,000 per month mortgage payment on a house that is currently worth, at best, $200,000 less than the first mortgage and home equity line you used to buy it. The likelihood of full recovery of the price is far outweighed by the interest you’ll pay waiting for prices to recover. 

So you stop paying the mortgage and with a little finesse on the system, you get to stay, payment-free for 6-12 months. If you use the strategies in this blog site you might stay for as much as 12-24 months without payments except utilities. 

When your options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on your credit score, and pocket the unpaid payments by as much as $72,000. 

Whether you could afford to keep making payments or not, the option is there and it is looking more and more attractive to you.

The outlook for neighborhoods where zero down financing, low down payment financing, negative amortization, ARMs etc., are headed for ghost town status. Surrounding houses, neighborhoods and cities are already suffering from declining tax revenues while costs are rising, pulling down the their credit ratings and the attractiveness of living in a particular County, City or development. The effect on States’ economies is thus far incalculable although we know it is negative. 

The mortgage lenders are looking to stop you from doing this using punitive measures like not allowing you to apply to government-backed agencies for mortgages for five years. 

The real answer is, as we have repeatedly stated in these posts, amnesty for everyone. As McCain’s economic adviser has assertively stated, the object here is simple — keep people in their homes at all costs. 

People in homes who have played by the rules will suffer as much or more than everyone else. The “fairness” of helping people who “should have known better” is not at issue here. 

More homeowners mailing keys to lenders instead of payments

Owing more than home is worth, recent buyers walk away

Catherine Reagor
The Arizona Republic
Apr. 21, 2008 12:00 AM

Instead of mailing in their monthly mortgage payment, a growing number of homeowners are sending lenders their keys.

As housing prices fall and rates on some mortgage loans rise, more homeowners are walking away from their homes, according to housing-market watchers.

These typically are people who can afford their mortgage but don’t want to pay on a loan that is more than their house is worth. They’ll live with the stigma or credit ding from a foreclosure just to get out from under their loan.

The growing trend, called “jingle mail,” is pushing up foreclosures and alarming market watchers, particularly in metropolitan Phoenix, where home prices have dropped 18 percent in the past year.

Foreclosures across metropolitan Phoenix climbed to a record 2,365 in March, according to the real-estate data firm Information Market. That is more than quadruple the number from a year ago.

Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.

“We paid $585,000. It was the peak of the market, but no one told us,” said Shaffer, a real-estate agent from Colorado. “We would probably have to spend the next 20 years trying to get right on the mortgage. That’s crazy.”

Assessing trend

The mortgage industry is struggling to estimate how many homes are going into foreclosure because of people who don’t want to pay, rather than because of people who can’t afford to pay. 

Industry estimates and anecdotes suggest the figure is climbing in the Valley because so many people who bought during the peak are now upside down in their mortgages.

Real-estate agents are hearing it more often from people who can’t sell. Mortgage lenders are reporting getting more jingle mail, and now there are businesses advising homeowners how to walk away. 

“Even if someone put 5 to 10 percent down but bought in the Valley during ’05 or ’06, they are likely upside down now,” said Brett Barry of the north Phoenix office of Realty Executives. “I don’t advise people to walk away, but how do you convince someone to keep paying when they owe so much more than their home is worth? They can’t sell, and their lender isn’t going to forgive $100,000 in principal. It’s not good.” 

Investors started the walk-away trend, but it has spread to the typical homeowner. 

Housing analyst RL Brown said he is hearing about young families who bought during the peak and are now walking away from houses as the interest rates on their loans reset and payments increase. 

“Instead of calling it a foreclosure, these couples are saying, ‘We’re giving it back to the bank,’ and then moving a couple of blocks away and renting a home for half their mortgage payment,” he said. “These people are finding it easier to walk away.”

Businesses are popping up that guide homeowners on the best way to walk away from their mortgage. One firm, Youwalkaway.com, tells unhappy homeowners to ask themselves these questions: Are you stressed out about your mortgage payments? Do you have little or no equity in your home? What if you could live payment-free for up to eight months and walk away without owing a penny?

Avoiding bankruptcy

For the first time, homeowners seem to be more willing to let their houses go into foreclosure to stave off bankruptcy.

In the past, homeowners would file for bankruptcy to keep their houses. Now, mortgage delinquencies have climbed faster and higher than late payments on credit-card and car loans. Economists say that is a sign people are more concerned about their credit than their home.

“Homes have gone from being a place to live to a disposable investment for some,” said Jay Butler, director of realty studies at Arizona State University’s Polytechnic campus. “It used to be that paying the mortgage was the top priority. Now, it’s keeping the credit cards.”

He said one reason is some homeowners think that with all the foreclosures, there will be programs to help them when they buy again. 

It usually takes three years of perfect credit payments after a bankruptcy before someone’s credit score is high enough to buy a home. Recently, people could buy a home again two years after a foreclosure.

Also, the Mortgage Forgiveness Debt Relief Act of 2007 took some of the penalty away from a homeowner filing for foreclosure. Before the act, if a bank sold a foreclosed home for less than the mortgage and forgave the rest of the debt, the borrower had to pay tax on the difference. Now, the Internal Revenue Service is forgiving the difference.

Lenders push back

But now as the number of people walking away is climbing, lenders are working on ways to punish those homeowners.

Earlier this week, mortgage giant Fannie Mae said homeowners who stop making payments and then send their keys back to lenders months later will not be able to get another mortgage through that firm for five years. Freddie Mac also is going after walk-away borrowers, mortgage lenders say.

Neighbors of the people who walk way are already being punished by lower home values due to the foreclosure. 

“People should hang in there as long as they can, ask for help and try to work with their lender,” said Margie O’Campo De Castillo of Arizona Dream Realty. “Foreclosures are dragging down our housing market, and unnecessary foreclosures are selfish and unfair to the homeowners struggling to pay.”

19 Responses

  1. I did not turn my will and life over to a condo and a bank. I also never signed an oath to maintain property values for my neighbors at all costs to my own family’s financial well-being. I made a promise to pay the bank in a timely manner or to surrender all rights to the condo. The intent was to live in it for 5-7 years and then sell it to buy a bigger house. But now, 7 years later the condo is $110K underwater and I can’t sell it, but I’m already renting a bigger house. I have a job and good credit. So I will take the hit on my credit, pay the IRS $40k in taxes, but I will not give the next 10-20 years of my life to paying three times as much as the condo neighbors do in a deteriorating complex that we don’t even live in any more. I need to save that money for our retirement and medical care in the coming decades. Anyone who tells me I am immoral or selfish for exercising my right to default to defend my family’s future is probably the same kind of person who thinks that gays shouldn’t marry, people shouldn’t get divorced, blacks shouldn’t be president and women shouldn’t vote. Get with the times, people! Things change. Don’t judge until you’ve walked in someone else’s mocassins.

  2. We are about to do just this.

    Our home buying experience was a nightmare (if you only knew then what you know now) we should have ran, should have hid… anything but signed those mortgage papers.
    we went from having a secured VA to a 80/20 ARM virtually over night w/a moving truck on its way from NY and a 15month old son. it was signed or spend what little money we had left to stay in a hotel until we found something else.
    We felt cornered and option-less. 4 years in that house, the roof leaked, the popcorn ceiling peeled. the electricity went out ALL the time.
    we could pay our payments at first, then my husband lost his nearly 50K a year job. things snow balled and no one would help. We eventually got a joke of a modification which kept us in the house for a few more months. At one point in August I decided I was done. No more fighting, no more stress, no more worrying if we were going to get thrown out. NO MORE!
    My family and I packed what we could and left.

    we are weighing our options between Jingle mail or Deed In lieu. I see no real difference and honestly jingle mail would be much more satisfying.

    DO NOT try to get a modification that works for you through Bank of America. it’s not worth it. Just walk away!!!

  3. This is such a great resource that you are providing and you give it away for free.

  4. I’m with leosroar. I home is being sold at auction in 3 weeks. I have an FHA, so no bailout for me that Freddie/Fannie got. Thanks gov for backing your own loans. I am embarrassed of my situation. BofA told me to start missing payments to get assistance. They told me this when I was current and asked them for help because it wasn’t looking so hot. It’s now worth 25% of my debt to it, it’s a business decision at this point. Bye home.

  5. I would like to thank you for sharing your thoughts and time into the stuff you post!! Thumbs up.

  6. […] the US it is easier than NZ for home-owners to walk away using the jingle mail options in the US. However in NZ it is far too easy for businesses to do the […]

  7. It’s unfortunate, that people like myself who purchased a home at the height of sales find themselves over $125,000 upside down. We made payment on time for over three years, foreseen upcoming issues, called the mortgage company, three times asking for assistance and programs. We were told that since we wereever late that there wasn’t a program for us. On top of that we have a VA backed loan which actually worked against us.

    So we took the hit, stopped making payments so that we could qualify for the assistance programs and have still been told that there isn’t anything they can do. We are now forced to walk away and rent.

    People who are trying to do the right thing by making payments on time, keeping credit in tact are the ones being punished. It’s very unfortunate.

  8. […] the value of our homes, salvage the lifestyle of our neighborhoods and deal with the blame issueshttp://livinglies.wordpress.com/2008/04/21/mortgage-meltdown-foreclosure-option-jingle-mail-send-the…Fairfield may partner to create TIF area Fairfield EchoFAIRFIELD ?? Fair Plaza could have a […]

  9. […] the value of our homes, salvage the lifestyle of our neighborhoods and deal with the blame issueshttp://livinglies.wordpress.com/2008/04/21/mortgage-meltdown-foreclosure-option-jingle-mail-send-the…Cities turn to impact fees to fund growth Today’s News-HeraldTo builders and developers, it is a […]

  10. […] unknown wrote an interesting post today onHere’s a quick excerpt“Instead of calling it a foreclosure, these couples are saying, ‘We’re giving it back to the bank,’ and then moving a couple of blocks away and renting a home for half their mortgage payment,” he said. “These people are finding it … […]

  11. What REALLY stinks is that people have so little conscious that they’ll actually plan to so something like this… 🙁

    Nick
    http://www.REI-TV.com

  12. […] Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys … You have a $3000 per month mortgage payment on a house that is currently worth, at best, $200000 less than the first mortgage and home equity line you used to buy it. The likelihood of full recovery of the price is far outweighed by the … […]

  13. […] Option — JINGLE MAIL (Send the keys … Posted in April 21st, 2008 by in Uncategorized Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys … It usually takes three years of perfect credit payments after a bankruptcy before someone’s […]

  14. […] Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys … You have a $3000 per month mortgage payment on a house that is currently worth, at best, $200000 less than the first mortgage and home equity line you used to buy it. The likelihood of full recovery of the price is far outweighed by the … […]

  15. […] d wrote an interesting post today onHere’s a quick excerptIn the past, homeowners would file for bankruptcy to keep their houses. Now, mortgage delinquencies have climbed faster and higher than late payments on credit-card and car loans. Economists say that is a sign people are more concerned … […]

  16. […] Option — JINGLE MAIL (Send the keys Posted in April 21st, 2008 by in Uncategorized Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys …options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on […]

  17. […] — JINGLE MAIL (Send the keys… Posted in April 21st, 2008 by in Uncategorized Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys… …options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on […]

  18. […] Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys… …options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on your credit score, and pocket the unpaid payments by… […]

  19. […] Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys… …options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on your credit score, and pocket the unpaid payments by… […]

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