Do banks get jingle mail?
Lately I’ve been hearing about a rising incidence of jingle mail – people posting the keys of their property back to the bank – and wondered if the people who abandon property in Ireland actually go to the bother of sending their keys back or just run for the hills?
According to the Central Bank 119 people either abandoned or voluntarily surrendered property in the last quarter and the numbers are steadily increasing. In the same three months last year the figure was 59 and the total for the year to September was 460. We don’t know how many were abandoned as opposed to voluntarily surrendered because the Central Bank doesn’t provide a breakdown.
A few industry people I spoke to said that property owners that do a moonlight flit prefer a quiet exit. “Some people may not want to alert the bank and may drop the keys back into the letterbox. It probably all depends on the individual future plans of the person as well as their financial situation.” says Frank Conway of Moneycoach.ie. Carol Tallon of Buyers Broker agrees, “It happens that people drop the keys back to the local branch but most tend not to notify anyone, the bank mightn’t know they are gone for months.”
Karl Deeter of Irish Mortgage Brokers says he has heard reports that a significant number of the people who abscond are foreign nationals. “They may have been laid off from their jobs, struggling and in deep negative equity and are not planning on living in Ireland long term.”
Jingle mail is more of an American phenomenon where walking away from a property and posting the keys back to the bank is made easier by the fact that many states have non-recourse mortgages. Borrowers here are liable for the remainder of the debt after a property is sold, and while there is anecdotal evidence that debt forgiveness is being exercised by banks, it is not happening in any structured way.
For those who decide to leave the debt behind , it is unlikely the bank will pursue them abroad . “However, on this point, says Conway, I believe that under EU law, there may be a mechanism where they can attempt some court action in another jurisdiction but I believe this is not being used for mortgage debt.Certainly for those who relocate to Australia, New Zealand, Canada or the US, lenders here will have little opportunity to pursue.”
One mortgage broker, who didn’t want to be named, said while the banks “spin a line” about their ability to pursue, logistically initiating proceedings in another jurisdiction is a costly and time consuming.
The more immediate problem will be arriving in a country with no credit record. Some of these countries may require a period of banking with the institution such as having a checking / current account as the lead-in to developing a credit record in that country. In the US, people are sometimes offered a co-signed debit card facility with a maximum limit for a set period of time before progressing to a credit card account and working from there .The time it will take them to build up credit will probably be no shorter than if they come out of bankruptcy under the new regime on its way in Ireland.
Conway says that many people who have moved abroad continue to pay their loans because they want to maintain a clean ICB as they may return home some day.
Foreign nationals who leave a property behind face less repercussions.
“I don’t think banks in their home countries will ask what their credit record was like here, clients could just say that they had no borrowings in Ireland….how could the bank prove or disprove this? Also, if you think about it, some people could be motivated to not pay some bills as a means of accelerated savings before their return.
My gut feeling, though, is that many foreign nationals who actually purchased here could be here for the long-run and may actually work that bit harder to keep their homes as they may no alternative accommodation to readily fall back on .”