Should you walk away from your home?

Daily Real Estate News  |  March 7, 2008Some Home Owners Just Walk Away
As prices drop, more home owners who bought at the top of the market are mailing their keys to the lender and walking away. In some circles, it's called "jingle mail."

For a fee, Web sites like YouWalkAway.com will advise home owners on the process. Because the legal costs are high, it is unlikely that a mortgage firm will chase those who walk away, although the law allows it.

In past downturns, few people have walked away from their homes, but the situation is different this time, some say. Many of the borrowers had high initial loan-to-value ratios. As home prices have dropped, these buyers are deep in the hole and don't want to pay for properties with negative equity.

"It may not be a big thing yet, and hopefully it won't be," says David Berson, chief economist for mortgage insurer PMI Mortgage Group Inc., of Walnut Creek, Calif. But if it turns out to be a significant trend, he says, it means that "delinquencies and defaults could be higher than the industry is estimating."

Source: The Economist (03/01/08)