Strategic default is not a new phenomenon, but it has grown in popularity in recent years as homeowners continue to wade their way out of the economic recession. Faced with negative equity and a slumping housing market, many borrowers are choosing to cease paying their mortgages even while staying current with their nonmortgage debts. Meanwhile, lenders are determining the best strategies for managing consumers who exhibit strategic default behavior.
By the end of 2008, a record one in five mortgages at least 60 days past due was a strategic default, according to Experian Information Services data. Since 2008, strategic defaults have fallen below that percentage in every quarter through the 2010 second quarter, the most recent for which figures are available. However, the percentages are still high — at 16 percent in the last quarter of 2009 and 17 percent in the second quarter of last year.
Join us for a detailed overview of consumer credit trends from the 2011 Market Intelligence Reports. During this event, we'll also take a detailed look at the current state of strategic default. We'll investigate where new opportunities as well as continued risks exist. Areas of focus will include:
Join Experian for a one-hour overview of results from the latest Experian–Oliver Wyman topical report, Strategic default in mortgages: Q2 2011 update and gain the essential information you need to contend with strategic defaulters. In addition, you will learn about Experian’s newest product to help identify strategic defaulters, Strategic Default IndicatorsSM. Areas of focus will include:
In our previous reports on strategic default, we used a large sample of borrower-level credit bureau data to define the phenomenon of ‘strategic default’ i.e., a borrower choosing to default on his mortgage even though he seemingly has the capacity to make monthly payments. We used the borrower’s payment performance on non-real-estate tradelines as a proxy for his capacity to pay. Our analysis tracked this phenomenon over time and its correlation with loan vintage, geography and number of first mortgages. This report provides the most recent update on strategic default using the most current data.
Experian, along with Oliver Wyman, pioneered and published the first research on strategic defaulters in 2009 and has continued the in-depth analysis to further understand and identify key behaviors and trends. This most recent snapshot, provides an overview of the full report and found that 17 percent of mortgage delinquencies are strategic defaulters. Although percentages slightly dropped since 2008, they still remain high creating a continual issue for lenders.
Would you like to talk to someone at Experian about products or services? Please submit the form below and we'll be in touch with you soon.