mortgage odds: heads I win, tails the bank loses

[sniglet]

This article does a great job of outlining the strong incentives home-owners have to walk away from their mortgages if they have negative equity. Many mortgages are "no-recourse" (i.e. meaning that the lender can't pursue any assets beyond the home itself). Moreover, even in cases where mortgages give recourse to the lender, they are apparently not doing so since the legal process, and odds of collecting, are so onerous.

Has anyone ever heard of lenders getting deficiency judgements against defaulting borrowers in the last couple years? I wonder how often this happens in Washington State.

[jillayne]

[sniglet]

[jillayne]

[sniglet]

Lenders are noticing that that increasing numbers of borrowers are deciding to just "walk away" even though they have the ability to keep making payments. The old stigmas about defaulting and honouring a contract just don't seem to hold the same weight they used to.

It looks like there is an increasing amount of evidence to back up my theory that most people are just going to send in the keys if they wind up in a home worth less than the value of the mortgage.

[sniglet]

Here is still more evidence that an increasing number of borrowers are deciding to "walk away" from their homes when they are worth less than the mortgage, even when they have the ability to pay.

[jillayne]

[jillayne]

[sniglet]

It's breath-taking to see just how quickly the idea of "walking away" from homes just because they are worth less than the mortgage is spreading. A local TV station in Sacramento even ran a segment on how to do "intentional foreclosure".

[jillayne]

[Alan]

[sniglet]

This just gets better and better... Mish's blog pointed out that there is actually a company called "You Walk Away" who's whole purpose is to work out a personalized strategy for you to turn your house back to the lender. Business is booming apparently.

[jillayne]

[deejayoh]

you should read Tanta's post over at Calculated Risk

[sniglet]