Last year, a national survey revealed at least one (1) in ten (10) homeowners or 7.4 million would choose to walk away from their mortgage obligations upon discovering their home is worth less compared to the amount of mortgage owed. Such decision is actually referred to as strategic default.

In Florida, strategic default has quickly gained popularity especially if you consider the fact the state has one of the highest foreclosure rates in the country.

Another study conducted by First American Logic showed homeowners start thinking of walking away from their obligations when the value of their homes fall by as much as 75 percent below the mortgage debt. This research was also supported by another trend study commissioned by TransUnion. Based on the study, which was released in January 2010, car payments are first priority, followed by credit cards while mortgages are the last priority.

First American Logic also reported there were about 4.5 million homeowners who have underwater mortgages by the last three months of 2009. This figure could reach 5 million by mid 2010 if home prices further declined in the states hardest hit by the foreclosure crisis. It was estimated the government would need about $745 billion to help these homeowners get out of their underwater situation.

As for short sale as a solution, experts believe more and more lenders are agreeing to this option especially after the Treasury Department has implemented stricter guidelines. It is recommended that underwater homeowners ask their lenders about other possible solutions such as reducing the principal amount of the mortgage.

Impact on Credit Score

Compared to a short sale where your mortgage debt could be completely eliminated or written off, your credit score will certainly be harmed with a strategic default since it will still end with the property being repossessed by the lender. However, since the other debts are paid on time and there are no other delinquencies, credit sore can recover much faster.

It would be wise to speak with a Realtor or agent, preferably one who is knowledgeable about Florida strategic default, short sale and foreclosure to find out which option is best for your situation.

Source: http://www.dailyfinance.com/story/investing/should-you-consider-a-strategic-default-on-your-mortgage/19346468/