The upside of jingle mail

By Felix Salmon
November 9, 2011

Most of the time, I consider it ludicrous that any member of the media ever bothers to interview the chief economist of the National Association of Realtors. It’s a paid-shill job, as its former occupant, David Lereah, now admits, and nothing coming out of the officeholder has ever been worth taking seriously.

On the other hand, sometimes the NAR’s chief economist says something so gorgeously and absurdly insane that it would be wrong of the media not to report it. And today is one of those days.

“Our members believe tinkering with the mortgage interest deduction at the high end will trickle down,” said Lawrence Yun, chief economist of the National Association of Realtors. “People view this as part of the social contract, as something that represents the American dream,” Mr. Yun said. “Therefore any changes are changes to the property rights of homeowners.”

Yes, he really said that: according to Yun, if we tweak or abolish the mortgage interest tax deduction, we’re directly attacking the property rights of homeowners.

Frankly, rather than making bonkers and obviously false statements about the mortgage-interest deduction, Yun should be much more worried about the future of jingle mail, or walking away. The same NYT section featuring Yun’s quote has two big articles about people who walked away from underwater mortgages: Carl Richard’s first-person account, and Tess Vigeland’s reported piece about homeowners who used YouWalkAway.com to do just that. All of them are much happier and financially healthier as a result of their action — and in fact I can’t think of a single article about someone who walked away from their mortgage and regretted doing so.

Homeowners and their self-appointed representatives, of course, hate the idea that other homeowners would act in such a way: it hurts their own property values. In fact, they hate the idea right up until the point at which they do it themselves, at which point they wonder why they waited so long to get this burden off their backs.

Walking away is a peculiarly American phenomenon, linked to the fact that many huge states, including California, have non-recourse mortgages. In Ireland, where many people are much deeper underwater, the default rate on mortgages has stayed surprisingly low, partly for social reasons and partly because all mortgages are recourse.

But the fact is that walking away makes perfect sense for millions of underwater homeowners, and that the banks are being incredibly short-sighted if they refuse to do principal reductions on the grounds that those homeowners will happily continue to pay their mortgage even when they have no equity in their homes and little prospect of ever regaining any. Because as the stories of walking away percolate in articles like these, the stigma will go away. And Americans will start actually doing, en masse, what has always been in their best interest.

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