And while everyone he talked with knew about this supposed phenonmenon, not one person could offer any evidence that such a thing was at all happening, much less that it was wide spread. Below, is the opening of the article:
In mortgage market, ‘walkaway’ homeowners may be urban myth
Bankers and housing analysts say many homeowners, owing more than their homes are worth, are defaulting on their loans even when they can afford payments. But no hard numbers back up their claims.
By Michael A. Hiltzik
Los Angeles Times Staff Writer
10:42 AM PDT, May 10, 2008
Bankers and housing market analysts are warning of a chilling new trend in the mortgage world: Homeowners voluntarily defaulting on their loans even though they can actually afford to make the payments.
It's known colloquially as "walking away," or more jocularly as "jingle mail," from the sound your house keys supposedly make when you mail them back to your bank.
It's a way of saying that Americans are beginning to apply a cold financial calculation to home ownership: When a home's value has fallen below what is owed on its mortgage, they feel it makes no sense to keep up the payments.
"That is going on, clearly, and there's lots of evidence of that in the market," Don Truslow, senior executive vice president of Wachovia Bank, said in a conference call with investors last month. A few weeks earlier, Treasury Secretary Henry M. Paulson had waggled a stern finger at homeowners contemplating walking away from affordable mortgages: Do that, and you're no better than a "speculator," he said.
Elsewhere, media reports and Internet postings are rife with stories about the trend and a supposed sea change in American attitudes toward debt. But there's a major problem with all this talk about the phenomenon of solvent homeowners "walking away": There doesn't appear to be any hard evidence that it's actually happening.
When pressed for the number of borrowers who could afford their mortgage payments, major banks and lender groups could not produce numbers figures.
Nor could the Mortgage Bankers Assn., the leading trade group for housing lenders. Spokesman John Mechem said he believed that walkaways by homeowners who could afford their payments were "becoming more prevalent." But he said that was based on "anecdotes we're hearing from our members and what we're reading in the newspapers."
Wachovia's Truslow acknowledged during the bank's conference call April 14 that walkaways were "hard to quantify." A bank spokesman said this week that "we have heard anecdotally that people are walking away" but that Wachovia had no hard numbers.
Bank of America Chairman and Chief Executive Kenneth Lewis, whose company is acquiring mortgage lender Countrywide Financial Corp., complained about "a change in social attitudes toward default" in an interview with the Wall Street Journal in December.
In response to questions from The Times, Bank of America spokesman Terry Francisco said the bank had seen indications that some homeowners were taking pains to keep their credit card accounts current at the expense of their mortgage balances, often by raiding their home equity lines to pay their cards, a reversal of traditional customary customer priorities.
But he said the bank did not have "firm figures" on how many homeowners were unnecessarily defaulting on their mortgages.
"We are working hard with our analytics to get at how much that is happening," Francisco said. Others suggest that it may be impossible to find out.
"How would you know what someone's true ability to pay would be?" asked Todd Sinai, an associate professor of real estate at the Wharton School of the University of Pennsylvania. "I'm not sure you could even come up with a definition."
At Fannie Mae, the government-chartered company that owns or guarantees billions of dollars in home mortgages, Senior Vice President Marianne Sullivan conceded that there was growing "folklore" about residential walkaways but said that the phenomenon was more likely connected to investors than people who live in their homes, or "owner-occupants."
"The vast majority of borrowers we find have been acting in good faith," she said. "If they get behind, they are interested in working with their lender."
Bruce Marks, CEO of Neighborhood Assistance Corp., a Boston-based nonprofit agency that helps strapped homeowners, says flat out that the notion that legions of borrowers are simply deciding not to pay is an "urban myth" that largely reflects the mortgage industry's desire to blame homeowners, rather than their lenders, for the surge in problem loans.
Marks and others assert that mortgage bankers have an incentive to blame the rise in delinquencies and foreclosures on borrowers skipping out on obligations they're financially able to meet, because that diverts attention from the lenders' own role in the mortgage crisis.
Much more at the above link.