Wikinvest Wire

Is "walking away" a myth?

Monday, May 12, 2008

This LA Times report asks if underwater homeowners "walking away" from their homes (a.k.a "jingle mail") is a myth?

In response to questions from The Times, Bank of America spokesman Terry Francisco said the bank had seen indications that some homeowners were taking pains to keep their credit card accounts current at the expense of their mortgage balances, often by raiding their home equity lines to pay their cards, a reversal of traditional customary customer priorities.

But he said the bank did not have "firm figures" on how many homeowners were unnecessarily defaulting on their mortgages.

"We are working hard with our analytics to get at how much that is happening," Francisco said. Others suggest that it may be impossible to find out.

"How would you know what someone's true ability to pay would be?" asked Todd Sinai, an associate professor of real estate at the Wharton School of the University of Pennsylvania. "I'm not sure you could even come up with a definition."

At Fannie Mae, the government-chartered company that owns or guarantees billions of dollars in home mortgages, Senior Vice President Marianne Sullivan conceded that there was growing "folklore" about residential walkaways but said that the phenomenon was more likely connected to investors than people who live in their homes, or "owner-occupants."

"The vast majority of borrowers we find have been acting in good faith," she said. "If they get behind, they are interested in working with their lender."
This sounds a lot like the 2005-era talk of "Is there a housing bubble?" They interviewed the folks at at the end of the article.

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Anonymous said...

I agree with you. When Jose Conseco publically admits he is doing it:In comments to the TV show "Inside Edition," Canseco says, "It didn't make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else."

then you know lots of others are doing it. It is like when kids no longer study computer science, no jobs and they are not stupid.

Anonymous said...

With President Bush’s changes to the bankruptcy laws it seems harder to get out of credit card debt than your upside down mortgage.

dearieme said...

"With President Bush’s changes to the bankruptcy laws": whatever happened to Separation of Powers?

Toby said...

Bankruptcy laws can saddle you with a payment plan on your credit card balances. MOST first mortgages do not have recourse against the borrower, even in bankruptcy. HELOCS though are generally treated like credit cards so be careful.

This phenomenon of paying of credit cards and letting the house go is an unintended consequence of the last revision of the bankruptcy rules by congress paid for by the bankers association. Karmas a bitch.

little larry sellers said...

Ben Stein is at it again!

Recession? What recession? Everything's fine!

Mathlete said...

Another factor is that you can keep borrowing on your credit card, but with no HELOC, what good is a house?

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