Strategic Default: Inconceivable Assumptions Suddenly Conceivable

Mortgage News Daily - 5-12-2011

Until recently it was generally believed that only a small fraction of Americans would willingly choose to skip their monthly mortgage payment, aka "strategically default", when they found themselves stuck in a negative equity situation.

Fannie Mae recently published it's latest National Housing Survey and exposed disturbing patterns and sentiments with American homeowners. For example, 46% of borrowers are "stressed" about their underwater mortgage, up from 11% in June 2010. That's an alarming four-fold increase in three quarters. That statistic becomes even more concerning when viewing the sheer number of borrowers faced with negative equity. At the end of 2010, which doesn't include the home price declines seen in 2011, CoreLogic estimated that 11.1 million homes, or 23.1 percent of all homes with a mortgage, were underwater. Think about those two stats this way - every morning, 46% of the estimated 11.1 million underwater borrowers wake up and debate why they should keep paying their monthly mortgage payment. Further weighing on borrowers is that 47% of borrowers surveyed reported higher household expenses than the year before...Click Here for the rest of the story