More than 11 Million homeowners agree that is a better value for them to abandon their houses and rent another one and that’s one quarter of all borrowers, this borrowers have in common that they were underwater on their mortgages by the end of 2009.
Also these strategic defaulters seem to have a better credit score than those who stayed paying their underwater mortgage.
Other borrowers that are up to date with their payments also walk away on their mortgage after seeing bank policies and government programs that gives them little assistance. Studies had discover than a big part of the strategic default is when the up to day payers walk away from their mortgage when they find out that other borrowers who have negative equity receive a partial loan for forgiveness.
However, the majority of foreclosures are not stratigic, and the Florida Association of Realtors started an analysis that cross referenced three years of foreclosures with demographic data. The idea is to find out what kind of people is falling into foreclosure, ignoring speculators and investors, just considering people that bought the house to live in.
This is what they found:
1. Income > $100,000 =20%
2. 8% School graduated
3. 15% College degrees
4. 92% Married
5. 65% Had children
6. 35% is the percentage of people that lived more than 10 years in their house.
A large part of them is people that lose their job and cannot afford payments.
Source: By David Garay, May 3, 2010 8:00 AM ET
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