Some homeowners see giving up as best option

That means many more homeowners are likely to follow Bondora's example by walking away and sending “jingle mail” (house keys and a note) to their lender.

“It’s likely that some people will do the math and decide to cut their losses,” Sharga says.

Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac. The first-quarter volume is equivalent to an entire year's worth of activity from 2005, Sharga said. He said foreclosure activity is likely to peak this year.

More than half of all home sale transactions during January and February of this year were distressed sales, according to Guy Cecala, publisher of Bethesda, Md.-based Inside Mortgage Finance. During this two-month period, 37 percent of all sales were foreclosures, and 19 percent were short sales, in which a home sells for less than the homeowner’s outstanding mortgage.

What’s become clear, however, is that the tough U.S. housing market has changed the way many homeowners look at debt and the stigma of struggling with it. Like Bondora, many homeowners, even now, are grappling with this question: Is it better to try to make unaffordable payments to hang on to a home that’s lost value, or to take the hit of foreclosure or a short sale but preserve cash in a recession?

Jon Maddux, chief executive officer of You Walk Away, a Carlsbad, Calif.-based company that advises homeowners on the foreclosure process, says his company has helped more than 5,000 property owners walk away rather than overextend themselves during the past 15 months.

Maddux said he co-founded the company in early 2008 because most foreclosure advice urges homeowners to do anything to keep their home, but in some markets it makes more sense for consumers to get rid of it. He thinks 2009 will present a “false bottom” to the foreclosure and housing market woes and that the market may not truly bottom out until 2012.

The walk-away approach, he says, may make sense for people who bought at the market peak and are “under water” on their loan, meaning that they owe more than the house is worth. It also may make sense for people who planned all along to live in their home only short-term or who are forced to move, people who already have damaged credit, people who live in foreclosure-heavy areas, and people who stand to lose more in a short sale, especially in states that allow “deficiency judgments” in which the seller must repay lost equity post-sale. Those laws vary state-to-state. In the case of Georgia, Bondora was told though lenders had legal recourse, many at the time figured they’d never get the money back.

“Walking away is a business decision, not an emotional decision,” Maddux says. “It comes down to surviving. People are realizing, 'I can’t sustain this anymore. I have to cut this off before it impacts the rest of my life.'”

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