Homeowners who 'strategically default' on loans a growing problem [View All]

[Liberal_in_LA]

Source: Los angeles times

A study shows that people who abruptly and intentionally abandon their mortgages often have high credit scores, in stark contrast with most financially distressed borrowers.
By Kenneth R. Harney

September 20, 2009

Reporting from Washington - Who is more likely to walk away from a house and a mortgage -- a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to "strategically default" -- abruptly and intentionally pull the plug and abandon the mortgage -- compared with lower-scoring borrowers.

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Among researchers' findings are these eye-openers:

* The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year's fourth quarter.

* Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.

Read more: http://www.latimes.com/classified/realestate/news/la-fi-harney20-2009sep20,0,2560658.story

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Another strategy: Reads another story about people on the edge of foreclosure handing over the keys to allow squatters to strategically squat. One lady handed the keys to a homeless woman who lived in the foreclosed home for 3 months. Another couple gave the keys to friends, telling them to ride rent free as long as possible