GUESS WHO'S DITCHING THEIR MORTGAGES?
A study of 24 million credit files by national credit bureau Experian and consulting company Oliver Wyman has shown that home owners with high credit scores are 50 percent more likely to deliberately walk away from a mortgage than lower-scoring borrowers.The industry calls these “strategic defaults” and their numbers grew to 588,000 in 2008, double the total in 2007, and well beyond most earlier estimates.The study determined:- Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all.
- Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida.
- Two-thirds of strategic defaulters have only one mortgage.
- Most likely to default are home owners with large balances and the highest credit ratings.
Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters "are clearly sophisticated” and look on the decision to default as a business strategy. "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," Tantia says of defaulters.
Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)
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