It’s Beginning To Sound A Bit Like Christmas

Jingle Mail
Jingle Mail
Jingle all the way
Oh how easy it is to walk
When foreclosure’s on the way, HEY!

Each year the dictionary’s add new words.  I remember back in 2006 when the word “google” was added to Webster’s as a verb as in “googling” something.  It makes me wonder if the phrase “jingle mail” will be the mantra for 2008.   For those of you unfamiliar with the term, “jingle mail” is when homeowners who are on the brink of foreclosure or for various other treasons literally mail their keys back to the bank (hence the jingling in the mail) and give the bank the home and responsibility of what to do with it from there (some call it a voluntary foreclosure).

The whole idea of walking away from homes has become a hot button issue – especially in California, one of the hardest hit states with homes on the brink of, or in the full blown state of foreclosure.   The first wind I got on the issue was a huge debate on the LA Land Blog for the LA Times.   The whole debate was so huge it ended up being showcased on 89.3 FM with full on interviews with those involved in the story the blog focused on. 

And just as with any crisis, the creative look for ways to cash in.  The LA Land Blog is reporting that 5-6 million homeowners will forego the traditional foreclosure process and will just walk away from their homes.  Enter: those crafty entrepreneurs who want to cash in on the housing market. 

Sign On San Diego and the New York Times both reported on You Walk Away LLC.  This group (for profit I might add) helps homeowners who are in over their heads literally walk away from their home.  The co-owner, Jon Maddux give’s this explanation/justification for his business plan: 

“The contract goes both ways. The mortgage has a clause that says if they don’t pay, the bank gets the house back. When they made the loan, it was risky. It allows for Plan B if (borrowers) can’t afford the home anymore or they have to make a decision whether to put food on the table or make the mortgage payment. . . . We try to help protect the homeowner.”

What are the consequences for walking away?  Well it depends!  Back in the day it happened so seldomly the banks would fight it hard and hit the former “owner” for all they were worth.  Now, things are different.  The banks are swimming deep in paperwork trying to keep up with the onslaught of homeowners who have made the same choice.  It also depends on the state you live in.  Many will face taxes, your credit report will certainly take a hit (you won’t be qualifying for any mortgage for at least 7 years), and there could be other ramifcations in certain states (garnished wages on the loss of home value to the bank, etc.).  But many seem to feel that they’ll be able to overcome the scarlet “F” emblazoned on their bosom within a decade.  And let’s face it, having to admit you’ve foreclosed almost makes you part of the in-crowd these days because so many people are doing it.

The bad news continues.  Having a huge influx of homes not worth their value with banks desperate to get rid of them won’t be helping your home value anytime soon.  But if you’re a buyer you might be able to score a sweet deal.  But who knows, if home values keep falling as predicted, that “sweet deal” of today might be tomorrow’s bitter taste in your mouth.