Survey shows thirty-two percent of Americans say it’s ok to strategically default on a mortgage

dennis-norman-st-louis-realtor-Strategic defaults are something I’ve written about several times over the past few years and is something that there are very strong feelings within the industry at opposite ends of the spectrum on in terms of whether they are OK to do or not. A strategic default is essentially when someone that has the ability to pay their mortgage but, usually because they are “underwater” (meaning they owe more than the property is worth), choose to “walk away” and allow the home to go into foreclosure. Almost one-third (32 percent) of Americans think there is nothing wrong with doing a strategic default, according to survey results just released by ID Analytics. Continue reading “Survey shows thirty-two percent of Americans say it’s ok to strategically default on a mortgage

Should you consider a strategic default if you are underwater on your mortgage?


Over one in four homeowners in the U.S. with a mortgage are “underwatermeaning they owe more on their homes than they are currently worth and, according to data just released from a survey by Zillow, 75 percent of them are underwater by 40 percent or more meaning it will most likely be many years until they even have the hope of seeing equity in their home again. Nonetheless, this has not deterred the majority of these underwater homeowners from “staying the course” as 59 percent said would not consider a strategic default in order to get out from under their home. Continue reading “Should you consider a strategic default if you are underwater on your mortgage?

Survey shows banks expect strategic defaults to increase in 2012

st-louis-realtor-dennis-norman-strategic-defaultFICO, a provider of analytics and decision management technology to the banking industry, today announced results from its latest quarterly survey of bank risk professionals which showed that almost half (46 percent) expect the volume of strategic defaults in 2012 to surpass 2011 levels as a result of more than 25 percent of U.S. homeowners owe more on their mortgages than their homes are worth.

“After five years of a brutal housing market, many people now view their homes more objectively and with less sentimentality,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Regardless of legal or ethical issues around strategic defaults, lenders must account for this risk when they evaluate mortgage applications in declining markets. Many homeowners who find themselves upside down on mortgages in the future are likely to consider strategic default as an acceptable exit strategy.” Continue reading “Survey shows banks expect strategic defaults to increase in 2012

Should homeowners walk away from underwater mortgages?

Most Americans are opposed to the idea according to recent survey

Dennis Norman St LouisThere have been several stories published on this site concerning borrowers that are “underwater” (owe more on their home than it is currently worth) and whether they should simply “walk-away” or do a “strategic default” in order to get out from under their problem. We have published views from both sides of this argument and both sides have made good points in support of their position. However, according to a survey conducted by, it is clear that the majority of Americans, 60 percent to be exact, believe it is “never OK” for homeowners to walk away. Continue reading “Should homeowners walk away from underwater mortgages?

Homeowners Should Think Twice if Considering a ‘Strategic Default’

Dennis Norman

Last month I wrote about a new policy implemented by Fannie Mae that would “lock-out” borrowers from getting a Fannie-Mae insured loan for 7 years if they did a “strategic default” or otherwise did not act in good faith and were foreclosed upon. In a nut shell, the borrower that Fannie Mae is targeting here is the borrower that has the financial ability to make their payments, accept a loan modification or other “work-out” from Fannie Mae but instead chooses just to walk away from their home and letting the lender foreclose.

In addition to locking out borrowers from a new loan for 7 years Fannie Mae has also made it clear in a recent announcement that they will “take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans“. Obviously, they can only do this in those States that allow a lender to sue a borrower for a deficiency but if you live in one of those states are are thinking of doing a strategic default on a Fannie Mae insured loan, you may want to think twice. Or at least be sure you get appropriate legal advice first and explore other options that are available to you.

Fannie Mae said that this month (July) they will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.