Bankruptcy
A Third of Americans Have No Qualms About Strategic Default
Kiplinger News
September 22, 2010
Strategic default - the practice of abandoning a home loan whose value exceeds the home's worth - is seen as unacceptable by a majority of Americans. But more than a third say they might default strategically, if pressed.
Pew Research Center reported last week that 59 percent of people believe it's wrong to walk away from a mortgage. Yet 19 percent of the 2,967 Americans polled in May said strategic default was acceptable - and another 17 percent think it could be OK, if the circumstances warranted.
Pew found that 21 percent of homeowners are underwater on their mortgages; if the housing market remains soft, more people may find themselves owing more than their homes are worth.
A rise in foreclosures could also erode many borrowers' home equity. California housing consultancy John Burns Real Estate Consulting reports this week that foreclosures may increase in the coming months.
There are 2.5 million foreclosures in process, and another 2.5 million borrowers are at least 90 days delinquent on their mortgages - so, JBREC says, the foreclosure problem is likely to worsen. If it does, more borrowers may opt to default.
