walking away from your mortgage

Kris from Vegas linked to this graphic. It shows the very worst time to have purchased a house in the USA was July 2006.

source

The situation in Vegas is worse than the national average.

Last week I toured the new Vegas home of a couple who defaulted on their old mortgage. They could easily afford to pay the (high) mortgage on their current house, but they got a far better home for much less due to the current market.

This was a strategic default.

People who default on mortgages they can afford to pay are savvy about credit and tend to have better credit histories than other defaulters, new research shows …

The University of Chicago Booth School of Business estimates that strategic defaults accounted for 35% of defaults in September vs. 26% in March 2009. In January, the Nevada Association of Realtors released a study showing that 23% of Nevadans who lost homes admitted to strategically defaulting. …

USA Today – Study: Underwater homeowners who walk are more credit savvy

They don’t seem to be too worried about any drop in credit rating. So many people are making strategic defaults that it’s become normal business practice.

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2 thoughts on “walking away from your mortgage

  1. The motivation for a strategic default may depend on how far a borrower is underwater.
    Having a mortgage that’s twice as much as the value of a home could be somewhat discouraging.
    The prospect of being stuck with a losing investment that may not reach a break-even point for 10 years or more may be enough motivation to take a walk.

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