This is one of those hot topics and this blog has been re-blogged several times. I'm re-blogging this for a different reason - to challenge the "statistic". I don't buy it. I talk to as many as 10 to 20 people a day who are suffering from financial hardship. I can count on one hand the number of people who are "strategically" defaulting. Most are searching for solutions. The banks have told people that they have "strategically default" in order to get loan modifications, then they deny the loan modification and foreclose. This is pure financial sector, marketing BS! JMHO!
Today I was reading a financial paper from my local mortgage lender and he attached a story about that 31% of the defaults are strategic. It is not that these homeowners can not make their mortgage payments but choose not to because of lost value.
The research showed that the strategic defaulters had not put much money into the home as far as downpayment and had no attachment to the "American Dream" of homeownership.
The homeowners also hear about all the big banks paying huge bonuses and taking bailout money being acceptable. When one bonus to an executive could pay off many loans or bring hundreds current.
They decision to drop the under water home versus waiting for 10 or more years to gain the lost equity is a financial decision not an emotional one. They would rather take the 3 to 7 years hit on their credit versus holding on to a property that will take so many years to gain any equity.
It gave me something to think about. How do you make the decision to choose between no strategic default but make mortgage payments for years essentially throwing the money away. Doing the right thing because your signature on the mortgage note is important to you.
Is this issue clearly black or white?
As real estate agents we know until the defaults slow down we will continue in a declining market.
If the strategic defaults continue to grow how will this effect our real estate market? Will this continue to allow the prices to decline. Will this declining market continue for more years because of strategic defaults?
Swann & Associates Real Estate, Inc
Serving Central and South Brevard County