The subprime mortgage meltdown mess and the collapse of the housing bubble have created a new phenomenon. Basically, people who can no longer afford their mortgages, and who know that they cannot sell their house, have decided to spare the mortgage holder the need to have them evicted. They simply put the keys in an envelope and send the keys to the bank.
It's called "Jingle Mail."
There was a story on "60 Minutes" last week about foreclosures, and as part of the story, Steven Kroft interviewed a couple who are going to walk away from their house becuase it has turned into a bad investment. They are willing to take the hit to their credit rating. What made this couple interesting is that they could continue to afford the mortgage. They just felt it was a money losing deal, so they wanted out.
On the one hand, you can make a case for walking away as a rational business decision. On the other hand...
Ultimately, modern societies run on a scarce commodity: trust. We trust that our paycheck won't bounce when we deposit it. We trust that the bank won't go belly up and lose our money. We trust that when we pay our insurance premiums, our car will be repaired if we're in an accident.
At the same time, businesses trust us. They trust us to return rented videos. They trust us pay for the dry cleaning, and not shoplift. And yes, they trust us to pay our credit cards and our mortgages.
All of the business regulation, insurance, and contract law that we have does not and cannot replace what is at the heart of every deal, from a used car sale to the biggest mergers: people keeping their promise to do what they say they are going to do.
So when we say it is okay for people to walk away from their mortgage, we're actually sapping the foundation of a civil society.
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