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.This sounds a lot like the 2005-era talk of "Is there a housing bubble?" They interviewed the folks at YouWalkAway.com at the end of the article.
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."