Strategic Defaults Remain High, No Relief in Sight

June 24, 2011 (Jeff Alan)

Strategic defaults still remain high according to a recently released report from credit bureau giant Experian. According to the most recent data available through the second quarter of 2010, seventeen percent of all mortgages that were 60 days or more past due resulted in strategic defaults.

Experian says strategic defaults peaked in the fourth quarter of 2008 when 20 percent of all mortgage defaults, that had reached the 60 day or more milestone, resulted in a strategic default.

Since then, strategic defaults had dropped to 16 percent in the fourth quarter of 2009 and then increased to the present level of 17 percent.

Charles Chung, Experian’s president of Decision Analytics, said, “It’s important for lenders to understand findings such as why about 90 percent of strategic defaulters are continuing to stay current on their other obligations — even a year after they’ve gone delinquent on their mortgage. Knowing more about these behaviors helps lenders personalize strategies for consumers who have defaulted on their loans.”

Although it would seem rather obvious, the report found a direct correlation between the rate in which strategic defaults occur and the amount that was owed on the home.

Loan default customers that had origination balances of less than $50,000 were much less likely to walk away from their homes with 6 percent of those resulting in strategic defaults, whereas those whose loan origination balances were more than $1 million were five times more likely to walk away from their homes as one-third of those resulted in strategic defaults.

Experian says they don’t expect the current rate of strategic defaults to decline until housing prices increase. Considering that homes prices have dropped even further since the latest data for this report was gathered, I wouldn’t expect that to happen anytime soon.

Tags: Experian, mortgage defaults, strategic default, credit bureau, delinquent mortgage, loan default customers

Source:
Experian