Strategic Mortgage Defaults on the Rise

Strategic default—walking away from your home and mortgage—is getting more common. The interesting part is who is doing it: according to a recent study, people with good credit. For such consumers, strategic default may be the best of a range of bad options.

The same study found that 588,000 people walked away from their mortgages in 2008, far more than the industry thought. And most of them seem to understand what they are doing—they just do not have any better option.

Displaying their continuing failure to make any intelligent business decisions, banks apparently try to identify potential strategic defaulters, and then avoid offering them loan modifications. If this group is defaulting strategically, they would probably stay in their homes if it made sense. Maybe the banks ought to try making sense, for a change.

Homeowners who ‘strategically default’ on loans a growing problem | LA Times (via Consumerist)