John Mayer's Real Estate Blog: Fewer Borrowers Purposely Default on Mortgage

Fewer Borrowers Purposely Default on Mortgage

Fewer borrowers purposely default on mortgage

NEW YORKMay 18, 2011 – As home values decreased and more borrowers found themselves underwater, some homeowners were opting for “strategic default,” choosing to stop making mortgage payments even though they could afford to pay. But analysts say the trend is on the decline.

In an analysis by JP Morgan Chase into strategic default, analysts found 60 percent of all defaults were strategic by the middle of 2009 – that’s more than double the percentage in January 2008.

However, the number has been decreasing. Analysts say that strategic defaults now make up less than 30 percent of all defaults (or 10,000 strategic defaults compared to 20,000 from one year ago) and that borrowers who are delinquent more than 90 days have even “lesser strategic delinquencies.”

“Overall, strategic defaults have stabilized as home prices flattened and initial jobless claims declined,” analysts say.

About 42 percent of underwater borrowers – those who owe more on their mortgage than their home is currently worth – remain current on their mortgage, according to the JP Morgan Chase analysts.

“Of course, the moral hazard of potential strategic defaults in the future is still present,” analysts say. “Even though these borrowers have not been defaulting in large numbers, the event risk remains that they could.”

Source: “Signs Show Strategic Default on the Decline,” Housing Wire (
May 16, 2011)

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Comment balloon 6 commentsJohn Mayer • May 19 2011 10:58AM

Comments

we are now seeing an increase in HOA fees not being paid, so even when they are able to keep up with the mortgages...something has to give.

Posted by Gwen Fowler-CRS- 864-638-3599 SC Mountains & Lakes--, Gwen Fowler Real Estate, Inc. (Gwen Fowler Real Estate, Inc) about 8 years ago

I need a BADGE or a GOLD STAR * I'm paying 2 mortgages - for my home AND a rental property with the help of a tenant! 

Posted by Wallace S. Gibson, CPM, LandlordWhisperer (Gibson Management Group, Ltd.) about 8 years ago

Gwen - You are right, delinquent HOA fees are a problem. Something has to give, indeed.

Posted by John Mayer, Your Beach Area Expert (Oikos Realty, Cape Canaveral, Cocoa Beach Florida) about 8 years ago

Wallace - Your "Platinum Star" is in the mail :-) Even though it's tough, you are doing the right thing.

Posted by John Mayer, Your Beach Area Expert (Oikos Realty, Cape Canaveral, Cocoa Beach Florida) about 8 years ago

I have nowhere else to go so am staying right here, that is my strategy John!

Posted by Wanda Kubat-Nerdin - Wanda Can!, So Utah Residential, Referral & Relocation REALTOR (Prado Real Estate South) about 8 years ago

Wanda - That's a great strategy. What comes down must go up, right?

Posted by John Mayer, Your Beach Area Expert (Oikos Realty, Cape Canaveral, Cocoa Beach Florida) about 8 years ago

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