The Washington Post reports on study of strategic defaulters
With their concerns fueled by rumors and facts, lending decision makers in the nation’s flagging real-estate industry need to know the truth about borrowers who are strategically defaulting on their home loans.
A recent study of this phenomenon performed by Experian and consulting firm Oliver Wyman and reported in The Washington Post revealed several eye-opening facts about these consumers. The study analyzed the behavior of hundreds of thousands of consumers over the last five years.
For example, there were 558,000 strategic defaults nationwide, more than double the figure for 2007. In contrast to most borrowers in financial trouble, strategic defaulters simply stop paying their mortgage. They are most likely in markets where home values first soared and then crashed, such as Arizona, California and Florida.
The study determined that two-thirds of strategic defaulters are walking away from their primary residence and that those owing high amounts are more likely to default than those with lower balances. People defaulting on their home loans do so by design, knowing that there will be a negative effect on their credit scores.
Determining which of their customers may be strategic defaulters and which may be good prospects for loan modifications or other options are the issues credit grantors must ponder. Perhaps the best solution is to tailor a program to each borrower’s situation rather than take a one-size-fits-all approach.
To view a Webinar about the study and receive a copy of the study and the article, contact your Experian representative or call 1 888 414 1120.