In the 1980s, around half a million people in Alberta left to look for jobs elsewhere. The federal government is now watching the Alberta market closely for defaults made on mortgages.
The reason is simple, high debts and layoffs make “jingle mail” an option in a province going through turbulent economic times.
Jingle mail refers to the act of walking away from a mortgage you are unable to pay by mailing your keys back to the bank. This act of desperation is actually a peculiarity of the Alberta residential market.
This ‘strategic default’ has played a role in the U.S. housing crash, but it existed in Alberta as early as the 1980s when people began leaving the province to look for employment elsewhere. It also lead to the bad housing market being made even worse when banks were forced to sell off abandoned homes at throw away prices.
These defaults also weaken the housing market and increase loan losses among Canada’s banks which could further lead to a weaker economy.
Alberta remains the only Canadian province to offer non-recourse residential mortgages. These are loans with at least a 20 percent down payment and thus are not insured by Canada Mortgage and Housing Corporation (CMHC). If you default the loan, you will lose your house, but will not have to suffer any personal liability. But elsewhere the lender could sue you and seize your other assets including your retirement plan and car.
In the 1980s, around half a million people in Alberta left to look for jobs elsewhere, they were able to walk away from their mortgages with no personal consequences, not even a bad credit rating.
However there is one main difference now and Alberta of the eighties, credit bureaus have access to all mortgage information, so bidding goodbye to your mortgage and house-keys could also mean saying bye to your credit score.