What is Jingle Mail?

When a borrower decides to walk away from mortgage payments and return the keys to the bank before the bank has a chance to foreclose on the property, this is known as “jingle mail,” in a reference to the sound the envelope full of keys will make when it arrives at the bank. The subprime mortgage crisis caused an explosion in jingle mail, as borrowers realized that they couldn't make their mortgage payments and they were rapidly losing equity in their homes. Rather than going through the foreclosure process, some people chose to surrender their keys early.

Banks use terms like “voluntary foreclosure” and “reduced motivation to maintain possession” to describe the jingle mail phenomenon, and in 2008, it began to be a serious problem for lenders. Most lenders are in the business of handling money, not managing real estate, and the sudden appearance of large inventories of properties to manage was problematic for many banks. Declining property values and stiffer lending standards also made it more challenging for banks to unload the real estate foisted upon them by unhappy borrowers.

For borrowers, there are some advantages to walking away from a mortgage, although there are also some serious repercussions. Sending in a package of jingle mail will help borrowers avoid the appearance of foreclosure proceedings on their credit records, but the loan will still be considered to be in default, making it challenging to borrow money in the future. The primary advantage to jingle mail in the eye of some borrowers is that it allows them to get out of a mortgage as soon as they realize that the mortgage cannot be paid, ensuring that they don't make more payments on a losing proposition.

A related concept is cash for keys, in which a bank pays a defaulting borrower to vacate a home. For banks, jingle mail and cash for keys are preferable to traditional foreclosure proceedings, because they generally receive the home in better condition, making it easier to sell.

There are all sorts of reasons for a borrower to resort to sending in jingle mail. Falling housing prices are a common reason, as are ballooning interest rates. Many borrowers caught up in the subprime mortgage crisis ended up with mortgages they couldn't handle, and in some cases their principal balances actually increased over time, making the mortgage even harder to pay off. When a subprime mortgage is combined with loss of a job or a sudden rise in expenses, throwing in the towel can start to seem like a good option.