17 Percent of Mortgage Defaults Strategic

June 23, 2011 No Comments »


Homeowners continue to walk away from their mortgages intentionally, according a report released today by credit bureau Experian.

The company noted that while strategic default peaked at a 20 percent share in the fourth quarter of 2008, it still remains elevated and is not likely to decline significantly unless home prices increase.

During the second quarter of 2010 (the most recent data available), strategic default was blamed for 17 percent of all mortgage payments 60 days or more past due.

It had fallen consistently from 2008 through the first quarter of 2010 before the recent uptick from 16 to 17 percent.

“It’s important for lenders to understand findings such as why about 90 percent of strategic defaulters are continuing to stay current on their other obligations — even a year after they’ve gone delinquent on their mortgage, said Charles Chung, Experian’s president of Decision Analytics, in a release.

“Knowing more about these behaviors helps lenders personalize strategies for consumers who have defaulted on their loans.”

Higher Loan Balances = More Strategic Default

The report also revealed that those with higher loan balances were more likely to strategically default than those with small origination balances.

“Of loan default customers with origination balances of less than $50,000, only 6 percent were strategic defaulters while 38 percent were distressed defaulters. For those with loan origination balances of more than $1 million, one-third had strategically defaulted while only 20 percent had defaulted under distress.”

So it looks as if those with more to lose are walking, while those underwater by small dollar amounts are sticking it through.

Tip: Can I refinance with negative equity?

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