Update: Congresswoman denies foreclosure report

Update: California Rep. Laura Richardson today denied a published report that her $535,000 Sacramento home had slipped into foreclosure, saying she had renegotiated her loan to keep the home.

The house "... is not in foreclosure and has NOT been seized by the bank," Richardson, a Democrat from Long Beach, said in a statement. "I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement -- with no special provisions." (Richardson's entire statement is at the bottom of this article).

Earlier, Capitol Weekly reported that Richardson walked away from the mortgage on her $535,000 Sacramento home, letting the house slip into foreclosure and disrepair less than two years after she bought it with no money down.

"While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees," the publication reported.

Richardson declined to comment for the Capitol Weekly story. Her office issued a written statement Wednesday afternoon.

Capitol Weekly, citing tax records at the Sacramento County assessor's office, reports "... in January 2007, Richardson took out a mortgage for the entire sale price of the house -- $535,000. The mortgage amount was equal to the sale price of the home, meaning she was able to buy the house without a down payment, even though the housing market was beginning to turn. A March 19, 2008 notice of trustee's sale indicates that the unpaid balance of Richardson's loan, which is held by Washington Mutual, is more than $578,000 –- $40,000 more than the original mortgage."

In addition to 100% financing on the home itself, the report quotes the woman who sold the house to Richardson as saying she also gave Richardson $15,000 toward closing costs.

The weekly reports that Richardson's residence quickly became an eyesore, angering neighbors. The report says she recused herself on two key House votes on government efforts to address the foreclosure crisis.

Richardson's statement, however, said she did not recuse herself from those votes, and was instead absent from the House.

Click below to read the entire Richardson statement.

'Walking away': A real trend or suburban myth?

Both the New York Times and the Los Angeles Times are out today with lengthy stories questioning whether the much-discussed "walking away" trend -- you might also call it voluntary foreclosure -- is a real event or a suburban myth. Both stories conclude that there is no good evidence to support the notion that more and more homeowners are making an economic decision to give up on their homes without a fight.

The L.A. Times' Michael Hiltzik: "At Fannie Mae, the government-chartered company that owns or guarantees billions of dollars in home mortgages, Senior Vice President Marianne Sullivan conceded that there was growing 'folklore' about residential walkaways but said that the phenomenon was more likely connected to investors than people who live in their homes, or 'owner-occupants.' ... 'The vast majority of borrowers we find have been acting in good faith,' she said. 'If they get behind, they are interested in working with their lender.' "

The New York Times' Vikas Bajaj: "The blogosphere is full of tales of homeowners who supposedly are choosing to mail the house keys to their lenders rather than keep their depreciating homes. And yet 'jingle mail,' the term for those tinkling packages of keys, appears to be far rarer than many seem to think. Freddie Mac, the big government-sponsored mortgage company, estimates that just 0.14 percent of the defaulted mortgages in its portfolio involved properties that were abandoned by borrowers."

Analysis: Agreed, there are no good data indicating that walking away is a real trend. But: Banks and lenders have established that they are clueless when it comes to understanding the people they lent money to, the true economic condition of those borrowers and the real reasons some of them stop paying their mortgages. In many cases, borrowers go into foreclosure without ever having a conversation with their lender. In those cases, the borrower's financial condition, and calculations, are a mystery. In short, it's not clear that lenders are a particularly reliable source on the issue of why some homeowners go into foreclosure.

Your thoughts? Is "jingle mail" real, or is it a suburban myth? E-mail story tips to peter.viles@latimes.com.

UCLA on recession risk: "Don't worry, be happy"

As promised, I gave the UCLA Anderson Forecast a quick read for better understanding of why the Wizards of Westwood don't see a recession.

In brief, it's an analysis you've heard before: There won't be a recession because the housing downturn is "mostly confined to housing." Construction employment is weak, but the labor market is not collapsing. We'll muddle through, the economy stalling but barely avoiding recession.

In housing, the forecast sees jingle mail as a noteworthy trend that reinforces the belief that the job market is OK: "This time people are walking away from their homes not because they lost their jobs, got divorced or had health problems, but only because declining home prices have turned their net worth in the house negative, a financial burden to carry into the future or turn over to the lender, whichever they desire. Many have chosen to walk way."

Unfortunately for those hungry for data on the "walking away" trend (is it real or anecdotal?), the report doesn't attempt to quantify the extent of jingle mail.

The headline quote really is in the report, part of Ed Leamer's breezy conclusion: "The data don't yet add up to a recession, and there is nothing here to challenge the basic story of sluggishness that we have had for two years. Don't worry, be happy. You have to avoid recession depression."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: US Presswire

Paulson's warning: Don't walk away

Interesting, and revealing, comments from Treasury Secretary Henry M. Paulson Jr. (pictured) in Chicago last night. With two of the nation's most influential newspapers reporting the same trend at the same time -- a rise in "jingle mail," or "walking away" from mortgages -- Paulson strongly urged homeowners not to walk away. He sounded a bit like a bill collector.

"Homeowners who can afford their mortgage should honor their obligations. And nearly all do," he said. "Homeowners who gambled in the housing market and viewed their purchase as a short-term investment may choose to walk away. Those who do this are nothing more than speculators, and they are not the focus of our efforts."

We have explored this issue to death on the blog, and the views here are pretty clear: Most of you believe that walking away from a mortgage is not a matter of honor, it is a financial decision, and sometimes the smart one, for borrowers.  It comes with serious consequences, but a majority of you have made clear you believe it is sometimes the best choice.

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Reuters