American Values certainly have changed, haven't they?  I know they are a lot different than when I grew up as a kid in the 1950's and ‘60's.  Then again, a lot has changed since then, hasn't it?

Well, needless to say I was pretty blown away when a I read a short blurb published this afternoon by the National Association of REALTORS® (NAR) where they reported that Credit giant, Experian and consulting company Oliver Wyman teamed up to look at 24 Million credit profiles and determined that the more sophisticated borrowers with the highest Fair Isaac FICO Scores were more than 50% more likely to make the decision to stop paying their mortgage, than the lower-scoring borrowers.

Those that make the decision to stop paying their mortgage while maintaining their other financial obligations have been dubbed with the dubious title of a "strategic default".  There were 588,000 of these strategic defaults in 2008 - more than twice the number in 2007.  Anyone want to bet 2009 more than doubles again?  The 588,000 represent 18% of all 60+ day delinquencies.

Lets look at some of the results revealed in this study.

Most Strategic Defaulters go from a perfect credit history to cold turkey when it comes to their mortgage and continue to pay all of their other debt.  Financially strapped borrowers will more often than not continue to struggle with their mortgages while letting other debts pile up and become delinquent.

The largest majority, two-thirds, of Strategic Defaulters only have a single mortgage on a primary residence.  The remaining balance of these borrowers have mortgages on either a vacation home or investment property and also have a high likelihood of walking away from their mortgages.

It should be no surprise that homeowners with high mortgage balances are more likely to walk away than those with lower balances.  Interestingly that the borrowers at the highest echelons of credit scores are the most likely to walk away - far more so then those with lower credit scores.

Those who walk away from their mortgages definitely have an idea of what is going on and how it will affect them in the future.  When they consider that they are $200,000 or more upside down in their home it is more of a business decision to take their licks now and recover in a couple of years.  For Strategic Defaulters it is all about the business decision and not about what is morally right or wrong.

The result of the Experian-Wyman study suggests that lenders and loan services figure out how to screen and identify this growing segment of affluent borrowers in advance and strongly suggests not offering them any sort of loan modification because the likelihood of another strategic default is extremely high.

Until Next Time, Have a Blessed Day,

John Occhi, Hemet CA REALTOR®

 This blog and the contents written here is the intellectual property of John Occhi, Hemet - San Jacinto Valley REALTOR® in the South West Riverside County region of the Inland Empire of Southern California.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. 

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0.  Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions. 

I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.