My uncle chose voluntary foreclosure, AKA Jingle Mail, a few months ago on a house in California. He lost his job and had to relocate to another state. At first he tried to sell the house, but the California real estate market has been hard hit and it would be impossible to sell for what he owed. Tired of the stress, he mailed in the keys. Now he is in escrow on a place in Arizona. So how does someone with a foreclosure on their record buy a new house?
Arizona Real Estate
The area he moved to has been equally hard hit by the real estate crisis. His new house is only $100,000, so he is paying cash. Since he doesn’t need a loan, no one cares that his credit is trashed. The crisis in a way worked out for him by lowering the price of homes so significantly he didn’t need a loan. His mortgage in California is non-recourse, meaning the lender can’t come after him for their loss. He is free and clear.
Jingle Mail – A Growing Tide?
In non-recourse states, the lender’s only option is to foreclose on the house. If the foreclosed house sells for less than is owed, the bank is out of luck. They cannot pursue other assets like bank accounts to make up the difference. However, other states do allow lenders to pursue their loss. Anyone considering Jingle Mail needs to understand their local laws before they end up in an even bigger mess.
I imagine my uncle is not alone, there must be other homeowners contemplating the same scenario. Let the overpriced house go into foreclosure and buy a cheaper one. If you are older, a baby boomer like my uncle, you probably have enough cash and assets to buy one outright. In that case, the consequences of the foreclosure are minimal. For many people it will only make economic sense to mail back the keys.
Thanks for reading. If you enjoyed this post consider subscribing for updates.
Posts
4 comments:
But how could you live with yourself? This is more than math.
@Dog - well in my uncles case he lost his job and had to move to find employment, so he didn't have much choice. I'm certain he lost ~$100k downpayment on the house in foreclosure. But yeah for the people contemplating this tactic, it's morally questionable. My loan is recourse so I can't walk away, even though the house next to me sold for 1/3 what I paid.
I just ranted on this today...
I disagree. If your uncle had $100K with which to buy a new home, he had the money to keep paying the CA mortgage. He had a choice and he chose not to do the right thing, which was repay the money he borrowed.
Post a Comment