Banks' mail jingles as borrowers walk:

[Joanne98]

By James Saft

LONDON (Reuters) - Increasing numbers of Americans are simply walking away from their houses and mortgages, increasing pressure on banks and the economy.

Rapid house price falls in many parts of the United States will soon leave as many as one in five borrowers owing more on their loan than the house will fetch, removing at a stroke the single most powerful incentive to keep up with payments.

The phenomenon of "walk aways" or "jingle mail," so called because of the noise the house keys make in the envelope mailed to the bank, is hard to measure but shows every sign of gathering pace and having a substantial impact.

Wachovia Corp. (WB.N: Quote, Profile, Research) went so far as to change its models on how quickly loans will go bad in the face of what it called "unprecedented" changes in consumer behavior.

"I don't know where the tipping point is, but somewhere when a borrower crosses the 100 percent loan to value, somewhere north of that ... their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up. It's almost regardless of how they scored, say, on FICO or other kinds of credit characteristics," Wachovia chief risk officer Don Truslow told analysts on a conference call.
http://www.reuters.com/article/reutersComService4/idUSL1619195020080418

[izquierdista]

1. Gee Don, How did that happen??

Maybe it's because FICO is about as accurate as astrology and reading entrails? Or could it be that once people realize how screwed they are, they don't care?

[Hugin]

2. My inner Conspiracy Theorist...

tells me this is the -real- reason for the great 1%-er interest in building a wall along the border.

My data? I seem to recall during the S&L crisis in Houston people would pack up and disappear into the night.
Quite literally.

It would seem the double standard is the Corporate players are more than willing to go to the islands to avoid what they owe... But, on an individual basis, it's not to be allowed.

Just like it's called war when Countries do it, and murder when one person does it.

:tinfoilhat:

Edit to add: I'll also include in my data the fact: I'm noticing their concern.

[Warpy]

3. That only works when the mortgages

demand a significantly higher monthly servicing than paying rent does. People who see the overpayment going into the toilet at a higher rate than a monthly rent check would would be crazy to stay.

People who just move quietly and send the keys in are the best of the bunch. Some folks are furious when the mortgage triples as the ARM kicks up or the interest only period elapses and trash the place first and don't bother to send the keys, just walk out the front door and leave it open so squatters know the place is available.

Lenders are going to have to realize they can't get blood out of stones and they can't get triple mortgage payments out of people who were barely able to afford the teaser rate. They're going to have to do the legwork it takes to decide which mortgagees should be convinced to stay on as renters and which they should work with to come up with bargain refinancing.

Being stuck with empty properties on their hands is bad enough. Being stuck with empty properties that have been trashed and are unsalable is far worse.