What Exactly is a Strategic Default?
There is more and more conversation regarding strategic defaults.
And that only makes sense since the number of borrowers deciding to take this path is increasing exponentially.
Let's first define strategic default in simple terms....
A strategic default is the decision by a borrower to stop making payments (i.e. default) on a debt despite having the financial ability to make the payments.
Why do people strategically default?...
There is a feeling which is growing among many borrowers that once their house falls in value so that it is no longer worth the amount of the mortgage(s) on the house, it might make sense to walk away from the obligation of paying the mortgage(s).
How long will this practice of walking away last?
As long as housing prices continue to fall, there will be more and more families choosing this option. We are currently trapped in a vicious cycle which will continue to force people to make a decision.
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