What is Jingle Mail? This name arose in Alberta in the 1980’s when mortgage holders started to mail their home keys to the banks. The envelopes would jingle. Alberta is the only Canadian province where non-recourse residential mortgages are commonly available. A non-recourse mortgage is one where the mortgage holder is not responsible for any short fall arising from the sale of the property.
Jingle Mail – How the Oil Crisis Resulted in Jingle mail in Alberta becoming more common.
Jingle mail is the act of walking away from an underwater mortgage by mailing your keys back to the bank.
This is starting to be used in Alberta as the oil crisis continues.
Alberta is the only Canadian province where non-recourse residential mortgages are commonly available. The other provinces and territories have full recourse mortgages, which means, the mortgage holder is fully liable for the total debt due on the loan agreement, even if the actual value of the property decreases.
A non-recourse mortgage is a mortgage with at least a 20 per cent down payment. It is not insured by the Canada Mortgage and Housing Corporation (CMHC).
Jingle mail was a serious problem for mortgage holders in Alberta in the 1980s, when mortgage rates approached 20 per cent and people began leaving the province to look for work. Banks sold off abandoned homes at a discount. Jingle mail also played a View Post role in the 2008 U.S. housing crash.
It is starting to be used in Grande Prairie and Fort McMurray. Calgary is also vulnerable as the drop in housing prices approaches 20%.
Unlike in the 1980s credit bureaus now have access to mortgage information and will report the abandonment of homes. This will be a black mark on a person’s credit report. However, this black mark will be lessened by a good record of paying credit card debt and other debt in a timely manner.
A 100 word message (50 is recommended) can be added to the person’s credit report explaining the mortgage default.
So, what can people do, who do not have a non-recourse mortgage, yet are underwater on their mortgage?
A personal bankruptcy will erase the mortgage debt. The person will also be able to live in the home for a few months, without mortgage payments, until the mortgage holder gets Conduct of Sale from the courts.
It is crucial that a debtor follow the trustee’s recommendation exactly on the procedures to be followed.
For example, if a person includes mortgage debt in his bankruptcy and then makes a mortgage payment, it will be considered that he has reaffirmed the debt and the mortgage debt will not be erased in the bankruptcy.
If you have any questions about this or other aspects of bankruptcy or consumer proposals you can set up a FREE consultation with our trustees, who are in every province and territory in Canada.
You can also set up a FREE consultation by calling us 24/7, Toll Free at 1-877-879-4770.