Strategic default is rising despite efforts being made by the government and mortgage lenders to stop the high foreclosure rates. In a recent study released in March over 30% of recent foreclosures were planned by the homeowner as a way out of a bad mortgage. These homeowners have the ability to pay their mortgages but choose not to do so because they owe so much more than the home is worth. This is a 10% increase from the same time last year.
The new study found that homeowners who know someone that have been foreclosed upon or have had their mortgage forgiven are more likely to walk away from their own mortgage. Home owners are also making the move to purchase a second home while their credit is still good then foreclose on the first to get out from the upside down mortgage. It is a trend in the housing market that was neither anticipated by lenders or real estate speculators.
If this trend continues the housing market may see another bubble burst as mortgages once thought safe now default. This trend is also flowing over into the commercial market where business owners are trying to save their businesses by ditching their overpriced mortgages.
