A bank walkaway is a decision by a mortgage lender (a bank) to not foreclose on a defaulted mortgage (when the borrower has ceased to make the payments), or to not complete foreclosure proceedings (to "walk away" from the mortgage). These are sometimes referred to as abandoned foreclosures or stalled foreclosures, though this latter term is also used more broadly when the foreclosure process has stalled for other reasons. In addition to homes directly owned by a bank, the same phenomenon occurs when the home is part of a mortgage-backed security (MBS), in which case it is the mortgage servicer who has chosen to not foreclose or to cease foreclosure proceedings. In the United States, bank walkaways have increased in recent years in the wake of the United States housing bubble, and they are also known as red flag homes. Definition The Government Accountability Office (GAO) defines an abandoned foreclosure as a mortgage that: has entered foreclosure, the servicer decides to not continue pursuing its interest in a mortgage loan (has stopped the foreclosure proceedings), the servicer has charged off the loan (considers it worthless), and the home is vacant. Rationale The primary reason for bank walkaways is that a bank expects to lose money by foreclosing – when proceeds from a foreclosure sale are expected to be insufficient to cover the cost of the foreclosure itself, together with securing, maintaining, and marketing the home for sale. Thus, if the bank were to foreclose (taking ownership) and then sell the home, the bank expects that it would lose money, and thus chooses to not do so. Also, if there are problems with the property which the bank, if it takes possession and thus ownership, might become liable for, the bank might choose not to do so. For example, if a property had chemical contamination, excessive refuse or waste, or environmental damage requiring expensive remediation (such as if it was used for the manufacture of crystal meth or other illegal and/or toxic substances), it might be too expensive to rehabilitate the property or clean it up in order to be able to resell it, and thus the bank might decide to abandon the foreclosure and thus not become owner of the distressed property. Consequences As with other departures from ordinary home ownership or foreclosure, bank walkaways leave homes in a state of limbo – the houses may be vacant and in