Strategic defaulters opt to continue paying on second liens

I define a strategic defaulter to be any borrower who goes from never having missed a. Most underwater homeowners continue to pay their mortgage.. Two Key Studies Show that Strategic Defaults Continue to Grow.. that trusted confidants had advised them that strategic default was their best option.

 · First, there is a difference between walking away from the property when you can afford to make the payments and when you cannot. It is called a strategic default, when you have the ability to make the payments but decide it serves you better to stop making payments and let.

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Now is a good time to take an in-depth look at these second liens. to pay the first mortgage – so-called "strategic defaulters." They all had home equity loans which ranged from $50,000 to $150,000.

Strategic defaults could get very ugly – Clearly, homeowners with no skin in the game have little incentive to continue paying the loan when the property goes further and further underwater. While the bulk of the zero-down-payment first.

The leverage option was of little importance until the housing bubble in the 2000s, as homeowners massively increased their leverage using second-lien mortgages. We demonstrate the problems that the leverage option causes for lenders, for homeowners (who pay for it, regardless of whether they want it), for regulators, and for the economy at large.

Most underwater homeowners continue to pay their mortgage.. to get good data about second liens on a property.. trusted confidants had advised them that strategic default was their best.

At the end of 2012, a federal tax break for short sales and foreclosures is set to expire, which means you’ll be required to pay income taxes on the remaining loan balance. If you get lucky, you can use strategic default to your advantage, walking away from a poor investment now and saving for a better one years down the road.