Wednesday, September 23, 2009

Homeowners who 'strategically default' on loans a growing problem --

Homeowners who 'strategically default' on loans a growing problem -- "Who is more likely to walk away from a house and a mortgage -- a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to 'strategically default' -- abruptly and intentionally pull the plug and abandon the mortgage -- compared with lower-scoring borrowers."

The researchers say 18% of all serious delinquencies are strategic defaults.

1 comment:

Fred Pilot said...

This illustrates a weakness in the current credit scoring scheme that cannot take into account the moral hazard of mortgage default since it is based on quantitative factors such as credit accounts and payment history.