Strategic Default – Walking Away From Your Home
The University of Chicago’s Booth School of Business and Northwestern University’s Kellogg School of Management just completed a recent study of homeowners who default on their mortgages. The San Francisco Chronicle published some of the details of this report. The article is available at SFGate. Apparently the study found that 26% of the defaults are categorized as “strategic default.”
Strategic default involves a homeowner deciding to not make the payment and “walk away” even though they have the financial wherewithall to continue to make their mortgage payment.
Several months ago there was much discussion about “walk aways” but not a lot of proof. This study now may lend some credence to the idea that there are people who can afford to make their payments, but because they are so far upside down on their home with no hope of recovery, they choose to walk away and default leading to foreclosure.
