Saturday, June 19, 2010

Jingle Mail and Chapter 7 -- The Bailout for Homeowners

The financial institutions and companies received their bailouts from Bush, Obama, and Congress. Despite the voluntary programs set up by Obama and Congress, foreclosures are still occurring at record pace. It appears the government doesn't care. Instead, they want the middle class to take personal responsibility for their finances, while the banks, companies, Congress, and Obama can run free to selectively choose who is worthy of their forgiveness.

Many know about corporate bankruptcies. Indeed, they unabashedly run to the court without fear or recrimination. On the other hand, the public has been brainwashed into believing they shouldn't do the same. Some on the right argue that companies create jobs so they should be able to use these "business" tools. This is a fallacy that many buy into. Federated Department Stores, Kmart, and other retail stores rely on the demand of the middle class to keep their doors open. Without demand, there isn't supply. Indeed, that's why buggy whip manufacturers went out of business after the automobile became widely available. You should remember Bush's plea to the middle class to run out and spend after 9/11. He knew the middle class is the key to the success of businesses in this country. Therefore, if demand keeps businesses in business, the middle class should have the same tools given to businesses to press the reset button.

So, with that fallacy dispelled, what is jingle mail? According to Investopedia it's

A situation where a homeowner mails his or her house keys to a mortgage lender due to an inability to meet mortgage payment obligations and a lack of equity in the property. If a homeowner is upside-down in a mortgage and feels the entire loan is a lost cause, he or she may choose to walk away from the property altogether and relinquish it to the original lender instead of going though the foreclosure process.

If a homeowner has difficulty making mortgage payments and is limited in his or her ability to refinance the mortgage - especially if there is no equity in the home or the value of the home has fallen in the market to less than the value of the outstanding loan - there is often little an owner can do but foreclose. This usually occurs when a weak housing market occurs during economic weakness in which job losses increase and salaries stagnate or fall.

This term was first used to describe the surprise mailings that mortgage lenders received following the savings and loan debacle of 1990-1991. This term resurfaced during the housing and subprime mortgage collapse, which began in 2006.


Although Chapter 7 or 13 may save your house, jingle mail puts the ball in the homeowner's court. The homeowner may not want the house anymore and can't sell it. Some have moved on to different cities and don't want to pay rent and mortgage. Others, may still want the house, but the mortgage companies are unreasonable. Many have advocated a disqualification of future home loans if this occurs. Wait a minute, did Delta forfeit any government contracts or use of airports because it filed for bankruptcy? Did any other corporation who filed for bankruptcy lose government contracts, loans, grants, etc. What's good for the goose is good for the gander.

One work of caution, if you are contemplating jingle mail or bankruptcy, consult with a lawyer first. There may be other options. Furthermore, your state may allow the mortgage company to seek deficiencies in the resale of the house. In any event, it's about time the American people started to demand equal treatment. If large corporations and banks get bailouts and passes for defaults and bankruptcies, so should individuals. If corporations can default on commercial mortgages (a rising trend) without recrimination, people should be allowed the same pass on their mortgages.

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