More homeowners are strategically defaulting on loans

June 08, 2011 09:11AM

An increasing number of underwater homeowners are voluntarily opting to walk away from their home loans, a practice known as “strategic default,” according to CNN.

A recent survey by Fannie Mae found that while only about 27 percent of homeowners would even consider walking away, that’s up from 15 percent last year, and Jon Maddux, CEO of, a company which advises people on the process, reports 10 percent more clients this year.

The profile of a typical strategic defaulter is not what you’d expect, said Peter Ticktin, a Florida attorney, whose firm is dealing with 3,000 foreclosure cases. “Because they borrowed money and stopped paying their loans, you would think they’re deadbeats — but it’s not like that.”

Most are good credit risks with high FICO scores, said Andrew Jennings, chief analytics officer at Fair Isaac, the company behind FICO. For some people, it’s just the sensible choice.

“Strategic default can be a financially sophisticated thing to do,” said Mark Fleming, chief economist for CoreLogic, the financial analytics company. “And it makes sense that more financially savvy people do it. They may treat their mortgages like they would their investment portfolios — in a financially ruthless manner.” [CNN]