'Jingle mail' as solvent home-owners leave properties

It's known colloquially as "walking away", or more jocularly as "jingle mail", from the sound your house keys supposedly make when you mail them back to your bank.

It's a way of saying that Americans are beginning to apply a cold financial calculation to home ownership: when a home's value has fallen below what is owed on its mortgage, they feel it makes no sense to keep up payments.

"That is going on, clearly, and there's lots of evidence of that in the market," Don Truslow, senior executive vice president of Wachovia Bank, said in a conference call with investors last month.

A few weeks earlier, US Treasury Secretary Henry Paulson had waggled a stern finger at home-owners contemplating walking away from affordable mortgages: do that, and you're no better than a "speculator", he said.

Elsewhere, media reports and Internet postings are rife with stories about the trend and a supposed sea change in American attitudes toward debt.

But there's a major problem with all this talk about the phenomenon of solvent home-owners "walking away": there doesn't appear to be any hard evidence that it's happening.

When pressed for the number of borrowers who could afford their mortgage payments, major banks and lender groups could not produce figures.

Nor could the Mortgage Bankers Association, the leading trade group for housing lenders.

Wachovia's Truslow acknowledged during the bank's conference call on April 14 that walkaways were "hard to quantify".

A bank spokesman said last week: "We have heard anecdotally that people are walking away," but his bank had no hard numbers.

Bank of America chairman and CEO Kenneth Lewis, whose company is acquiring mortgage lender Countrywide Financial, decried "a change in social attitudes toward default" in an interview with The Wall Street Journal in December.

In response to questions from the Los Angeles Times, Bank of America spokesman Terry Francisco said the bank had seen indications that some home-owners 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 customer priorities.

But he said the bank did not have "firm figures" on how many home-owners were unnecessarily defaulting on their mortgages. Some people suggest it might be impossible to find out.

"How would you know what someone's true ability to pay would be?" said 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 there was growing "folklore" about residential walkaways, but said the phenomenon probably was connected more 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."

Bruce Marks, CEO of Neighborhood Assistance Corp, a Boston-based non-profit agency that helps strapped homeowners, says the notion legions of borrowers are simply deciding not to pay was an "urban myth" that largely reflects the mortgage industry's desire to blame home-owners - rather than their lenders - for the surge in problem loans.

Marks and others assert that mortgage bankers have an incentive to blame the rise in delinquencies and foreclosures on borrowers skipping out on obligations they're financially able to meet, because that diverts attention from the lenders' own role in the mortgage crisis.