As the times change, language hurries to catch up. The financial debacle of the early 1990s known as the "savings and loan crisis," or "S&L crisis," gave birth to the phrase "jingle mail."

I'll attempt a definition—

jingle mail n. Mail received by a mortgage lender from a property owner that contains the keys to the property. The owner thereby signals that he or she has abandoned the property and does not intend to contest foreclosure.

I don't know how many homeowners have already sent their lenders a piece of jingle mail, but the number has certainly been growing. And 2009 promises an upsurge—

• Many adjustable-rate mortgages (ARMs) are just now reaching the point where the low-cost "teaser rate" ends and the homeowner is faced with a payment significantly higher than he or she can afford.
• As jobs and incomes decline, even homeowners enjoying a fixed-rate mortgage will be unable to keep up their payments.
• As these foreclosed homes reach the market, the surplus will force prices to fall even further. As a consequence, more and more homeowners will find their mortgages "upside down" and they themselves "underwater"—which means that their home will be worth less than the amount owed on the mortgage (or mortgages). Some owners—especially those who have bought the home as an investment rather than as a residence—will make the "business decision" to walk away from a bad investment. In most states they have nothing to lose but their credit score.

On that latter point economist Nouriel Roubini recently tried to sober up the conservatives at the American Enterprise Institute (AEI)—

... home prices have already fallen by about 20 percent from the peak. Given the excess supply number and other factors I would expect home prices are going to fall another 20 percent for a cumulative fall of 40 percent from the peak.... —something we haven’t seen since the Great Depression.

Now this fall in home prices is important for 3 reasons. As long as it occurs, residential construction is going to keep on falling.... Secondly there is a huge wealth effect coming from a fall of $6 trillion of housing wealth. But the most important factor I think is that right now ongoing is that with such a fall in home prices, by the end of next year about 40 percent of all households with a mortgage are going to be underwater—negative equity with the value of their homes below the value of their mortgages. So, about 21 million out of the 51 million houses that have a mortgage will be underwater by the end of 2009. And there’s a huge incentive to walk away from your home....

Now, not everybody is going to walk away. Let’s be even conservative. Let’s assume that only 1 out of 5 people that are underwater are going to walk away. If you do the math ... you get additional losses for the financial system of the order of $400 billion dollars. This is on top of all the other write-downs that have already had been made through subprime-kind of a writedown. So that’s another huge loss for the financial system.

This is just assuming that only 1 out of 5 people underwater are going to walk away. If it’s more like 40 percent [who walk away], then the loss is another $800 billion. So you’re in a situation in which you can wipe out a good chunk of the capital of the financial system.

If the real estate market has the potential to wipe out "a good chunk of the capital of the financial system," just wait till you hear about credit-default swaps (CDSs).

If you are sober, you may wish to get drunk. And after you've quaffed your wassail, you may feel like singing. So here's a little ditty to go a-caroling. It's sung to the tune of "Jingle Bells" —

Jingle Mail

Piling on the debts
For a granite counter top
And cherry cabinets
Has turned into a flop
The bankers get bailed out
Which makes their spirits bright
The people hold the bag
Will they put up a fight?

Chorus:
Oh, jingle mail, jingle mail,
The keys are on the way
It’s no fun to own a house
Whose mortgage I can’t pay-ay
Jingle mail, jingle mail,
Jingle all the way
It’s no fun to own a house
Whose mortgage I can’t pay.

Verse 2:
Several years ago
Alan Greenspan was our guide
And soon Miss Fanny Mae
Was seated by our side
The ARM was lean and lank
With a teaser rate to boot
Collateralized by the bank
Systemic risk was moot

Chorus:
Oh, jingle mail, jingle mail,
....

I don't know who composed this song. It was left by "regiomontanus" (which means, maybe, "Mountain State" or "Montana area") in a comment to Roubini's post. It's the only copy that Google knows of, so perhaps "regiomontanus" is the author.

Related post
Announcement of the Day: It's a recession! (12/02/08)

Tags: news and politics recession economic depression real estate market finance foreclosure