Recently declining oil prices have made a significant dent in the Alberta economy. Calgary’s housing market is starting to show the most signs of damage as the rumor and probably reality of defaulting mortgages starts to show up again. Alberta is the only place left in Canada where you can walk away from your mortgage and the bank can’t come back after you for whatever short fall they may have had on the mortgage. Houses that are upside down or have more mortgage than value are becoming more common these days. Owners are walking away in these cases and turning the keys into the bank, a recent CMT article refers to this as jingle mail where the keys are mailed in and the clients are gone.

It is something that hasn’t happened in Alberta since the early 80’s and as someone who was here during those days it does feel that way again. My wife actually worked for a now defunct credit union and the dropping off of keys was a daily occurrence for some time. You also have to remember that interest rates were in the 18% neighbourhood and housing was still quite expensive for the times.

A recent trip to Fort McMurray gave me some concern as the prices I see there are starting to decline substantially as homes that were closer to 800000 dollars a year and a half ago are appraising for closer to 700000 dollars. Not a worry for those who have been there since the early 2000’s but if you moved in the last 5 years then you may be wishing you had not done so. There is of course stories of the East Coast worker who no longer has employment in Ft McMurray turning in his keys and returning home as they already had a paid for home there to return home too.

Much has changed since the 1980’s as today your mortgage now appears on your credit bureau something that finally began to happen here not much more than a few years ago. So while you may walk away from the mortgage it will appear on your credit bureau and if you default on an insured mortgage CMHC keeps track of that as well and getting financed again without 20% down payment may not be a possibility.