"Jingle mail:" The Awful Sound Of "Voluntary" Foreclosure

Guest blogger Peter Viles is a senior producer for LATimes.com and author of the real estate and housing blog LA Land.
As the foreclosure crisis deepens, banks and lenders are talking openly about one of their worst fears: "jingle mail" – the phrase that describes what happens when a borrower gives up on a house and a mortgage, and simply mails the keys back to the lender and walks away from the mortgage.

Why would a homeowner do such a thing? Because they overpaid for their home, now owe way more than their house is worth, and can't see the point in stretching their finances any longer. The consequences are serious for the borrower: a foreclosure, even if it's voluntary, damages your credit rating for years to come.

But some homeowners are just that desperate.

One of them, writing under the blog name "condoblue," caused controversy on my blog when she wrote to say she was thinking of walking way from a $520,000 mortgage: "I realize I agreed to the deal when I signed the mortgage papers," she wrote, "but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions."

Surprisingly, most of my readers agreed with her. When I posted a poll asking whether walking away from a bad mortgage is "irresponsible" or "the smart thing to do," 63 percent agreed with "condoblue" – that walking away is the smart choice. And that's a scary trend for banks and lenders.