Strategic Defaults and the Foreclosure Crisis

[Craftsman]

Nearly a year after the Obama administration unveiled its ambitious housing rescue program, foreclosure tallies continue to break records. Foreclosure filings were reported on more than 2.8 million properties in 2009, up 21 percent from the previous year and 120 percent from 2007, according to RealtyTrac. With nearly 10 percent of mortgages now delinquent--which is also a new record--even more homeowners appear headed for foreclosure this year. "A massive supply of delinquent loans continues to loom over the housing market," RealtyTrac CEO James J. Saccacio said in a statement. "Many of those delinquencies will end up in the foreclosure process in 2010 and beyond."



Homeowners have found themselves in foreclosure for a number of reasons. Some purchased properties they could never really afford. Others lost their jobs--the national unemployment rate remains in the double digits--and had no way to make mortgage payments. But as the crisis rumbles forward, an additional driver of home foreclosures has become clear: Many borrowers have the means to keep paying the mortgage but are simply walking away because they believe it's best for their finances.

The number of so called "strategic defaults" more than doubled, to 588,000, from 2007 to 2008, according to a study by Experian and Oliver Wyman. A separate 2009 survey found that more than a quarter of all existing defaults were strategic. Meanwhile, a growing number of academics are touting the financial benefits of walking away. "Homeowners should be walking away in droves," Brent T. White, a University of Arizona law school professor, said in a recent paper. "The financial costs of foreclosure, while not insignificant, are minimal compared to the financial benefit of strategic default."



The case for strategically defaulting is linked to negative equity, or owing more on your home than it is worth. With home prices at the national level having dropped roughly 30 percent from their 2006 peaks--and a great deal more in certain bubble markets--a considerable chunk of property owners are now in this fix. Nearly 1 in 4 borrowers currently have negative equity, according to First American CoreLogic. And rather than continuing to make payments on an investment that's now worth significantly less than what they paid for it, many borrowers are throwing in the towel.


http://finance.yahoo.com/news/Strategic-Defaults-and-the-usnews-2190373684.html?x=0&mod=loans

[democracy1st]

1. and his economic team is still looking out for Wall St..His admin is going down in flames with this

economic team in place.

[Craftsman]

2. IMHO Alot of MA was about the economy

And keep in mind MA has a unemployment rate of about 8%. What will it be like in higher areas by November.

[blm]

26. And yet you posted AGAINST the Dem who was running against Wall Street financiers and you like Brown

who is OWNED 100% by Wall Street financiers.

Cry us a river.

[Craftsman]

29. IMHO the many of the dems are now the flip side of the same corrupt coin

as the reps. Once they were the party of the working and middle classses, but that has ended. They need to stop paying lib serive adn start doing something like getting rid of free trade, jobs, investigating and prosecuting Wall St.

[blm]

31. yet you posted AGAINST the Dem running against Wall St. and in favor of Brown, a Wall St tool.

Gee...why would that complete lack of logic make anyone want to trust your motives?

[Craftsman]

33. I posted against currupt prosecutor

who would go after a kid molesting priest or a dirty cop. I would not have voted for either of them if I lived in MA.

[blm]

37. You didn't try and take down Brown did you? You know nothing about prosecutors and the kind of

deals they have to make in considering ALL the evidence and/or the lack of evidence. Sometimes what you have to do isn't right, but rule of law forces the outcome.

Funny how you had no problem with Huckabee's pardon for murderer and Bush's execution of innocents. And you have no problem with Brown's corruption and lies.

[blm]

41. You said last week that Mass was a problem because Coakley is 'corrupt'.

Now for THIS thread against Dems you're claiming Mass was about the economy, and somehow the Dems should be the ones blamed for the YEARS of GOP corruption that ruined economy for working class while they deregulated financial industry for their fascist masters.

Try logic and consistency....or... doesn't it suit your purpose here?

[leveymg]

3. Obscures the fact that 80 percent are people losing their only homes, and nothing done to help them

This "strategic default" meme is a tactical distraction. It's not just greedy investors calculating their bottom lines, but families being thrown out into the streets.

[Craftsman]

4. No necessarily thrown in the streets

Families are doing this as well. Stop paying and wait 9 to 18 months rent free before having to move. I know a family that is doing this, and in the late 1980's saw it first hand.

[leveymg]

6. Nobody goes through foreclosure and eviction by choice. Investment props are a

different issue, altogether, and should be treated differently than people in hardship being thrown out of homes they've occupied and made mortgage payments on for years.

[Craftsman]

8. I have a friend who lives in CA, he has told me there are 2 families

he knows in his subdivision that can pay but have stopped and are staying rent free untill kicked out. The thought is they save some of the oney to get into a rent house whenthey ahve to move and use the rest to pay off other bills. One of the families took a vaction to Disney over the Christmas break. The housing prices values ahve dropped abaut %35 there.

[Robb]

9. Yeah, everyone loves moving so much.

I would take such stories with a grain of salt. Again, the vast majority would choose to stay in their homes were it feasible.

[Craftsman]

10. When you owe $500k on house now worth $300k or less moving looks good

Banks don't want to foreclose, they've to many houses on the books already. You can stay insurance, tax, and rent free for about a year or more. Use the money for other things, then rent for 3 to 4 years rebuilding your credit to buy again. If makes finacial sense to many.

My wife and I owe $127K on house worth about $160K, but if we were in that shape we would be having a fe long hard idscussions on walking away.

[leveymg]

13. When you've lived in a house for 15 years, it doesn't matter if it lost value. Houses are homes

to those of us who don't just see everything in terms of money. There are some who would abandon their children, too, but that doesn't mean that the gov't shouldn't help those who want to keep their families together under the same roof they've lived in for years.

You've taken a morally inexcusable position on this one. Foreclosures, like homelessness, are both social evils that need to be prevented, even if it comes at a cost to business or with a raise in taxes for those who can afford it.

[blm]

16. Figure it out, leveymg.....morally inexcusable is the policy of choice for Republicans.

Or didn't you see the weeks of antiCoakley postings calling her corrupt?

[Craftsman]

19. Yes it is wrong. I agree.

But since when has that stopped many people when it comes to money. For years the American people were told your house is not ahome it is an investment. Now it is for millions of families a bad investment. They see Wall St walking away and now some of them are starting to do the same. This will end badly for all.

[blm]

23. Yet you are here to make it end badly only for Dems as you skew perception that

Dems are equally responsible for all the cheating and thievery of the financial elite. They aren't. You kbnow it and that is why you are here consistently posting against Democrats while softstepping around the GOP's involvement....involvement by 100%.

[leveymg]

35. Only the Dems can and will fix the damage of all the years of corruption. Failure to make a real

effort to fix the mess will also lead to political extinction. We have a choice. The GOP is already extinct, but that doesn't relieve us of the duty to set things right, or the consequences of failing to try.

[blm]

50. He's here to get the rest of us to forget GOPs role and BLAME it all on the Dems

and in this thread he wants to dissolve any sympathy we would have for homeowners HURT by the GOPs decades of deregulation for the financial industry, mortgage industry and crooked developers.

[Craftsman]

17. Suposed you've lived in it for 5 years or less

Some will walk and some won't. But many that bought in the past 5 or so years who put little or no down will walk.

[closeupready]

30. I disagree with your argument that walking away is morally inexcusable.

In some circumstances, it IS the moral thing to do.

[leveymg]

39. I said its morally inexcusable to allow foreclosure on families who want to keep their homes

Not that its immoral to walk away from a bad investment. That doesn't mean that investor "walkaways" should be sanctioned or rewarded by society if it results in significant costs to the community.

[closeupready]

46. Oh, sorry, I misunderstood. In that case, I completely agree with everything you said.

:)

[leveymg]

48. 'Tis OK.

:hi:

[Craftsman]

12. When 80% of the house in an area are worth $100K plus what is owed

if even 1 in 10 of them walk that is 8% in foreclosure.

[blm]

27. and yet you want MORE Republicans in office - the same ones who gave the financial industry the

deregulation they wanted and the room for loopholes to do what they're doing.

[blm]

51. typical..... *crickets* instead of answers when cornered.

.

[Craftsman]

53. The dems have been in control of congress since 1-2007

Plenty of time to really help out working and middle class families. So far IMHO they ahve paid lip service to it.

[blm]

55. You STILL can't admit GOP fucked over this nation in service to financial industry fascists.

You blame consumers who were set up to lose by the DEREGULATORS that YOU want back in full control of DC.

You are working AGAINST Dem party and in support of GOP as a way of siding with working class? HAHAHAH....sure you are. And you posted criticisms of those foreclosed upon knowing full well they were SET UP to default by the CORRUPT financial industry YOUR Republicans deregulated...as they were PAID to do. Focking fascists.

[Craftsman]

56. Of bloody course the gop screwed us!!!

But what have the dems doen to fix it? If you've a majority you have the resposiblity.

[blm]

57. Sure....yet all your energy is used AGAINST Dems, even the 80% of good Dems.

Blame the few who HELPED your fascist Republicans ruin this country and joined the deregulation bandwagon.

It ONLY benefits Republicans when lies 'both parties are the same' are told about the entire Dem party.

You know this...and THAT is what motivates your postings against Democrats....AND your postings against the working class VICTIMS of GOPs policy of deregulation.

[Craftsman]

59. The dems are in power and are not doing a blasted thing

Can't fix the past so no use dwelling on it.

[blm]

60. HAHAHA....you expect us to SWALLOW that reason why you don't point to GOPs role in deregulating the

very industries that are RAPING this nation and its working class?

Why don't you post a DEMAND that Dems OVERTURN the work done for their fascist masters and demand RE-REGULATING the industries? Instead you post only AGAINST the very Dems who want those industries regulated.

[Egnever]

54. People are doing it by choice by the hundreds out here in Vegas

Houses here have gone from 300k 4 years ago to 100k today. Lots of people who bought at the peak of the market are walking away by choice.

[midnight]

5. It is difficult to understand how these bankers who have salaries in the

hundreds of millions of dollars , Goldmansacs, take our money, and then shut the door on those the president has nicely asked them to help...

[Craftsman]

11. Because it is smoke and mirrors

Look at the way they govern and vote not what they say. Both parties are owned lock, stock, and barrel by the thieves of Wall St.

[blm]

20. Financial industry owns 100% of GOP. They own 20% of Dems. You're here to pretend they are equal

because that perception benefits only one party.....GOP.

[Craftsman]

22. IMHO both parties are bought and paid for by Wall St.

Yes there are a few who aren't but most on both sides are.

[blm]

24. ONE HUNDRED PERCENT of the GOP. TWENTY PERCENT of Dems. Why do YOU post only against Dems?

Coakley was running against Wall St. and YOU kept calling her corrupt.

[Craftsman]

28. She is corrupt

that has nothgin to do with her being against Wall St.

[blm]

34. No, she isn't. Prosecutor offices make deals. Huckabee pardoned murders and Bush executed innocents.

You made no postings against them and have no problem with Brown being OWNED by Wall Street's biggest crooks, even while you use your energy here at DU whining about Dems' involvements with Wall St.

Try logic and consistency. That would be a neat trick for you.

[Craftsman]

36. 2 wrongs do not make a right

and like I said I would not have voted for either.

[blm]

38. Yet you didn't use your energy against Brown, and are still posting only against Dems in this thread

Who do you think you're fooling?

Whenever you say anything even close to negative about GOP you only do so in terms that Dems are no different and are equal in criminality. Who does that lie benefit? The criminal GOP....but...that's what you're counting on.

[Craftsman]

42. I was and am against both and just because there is a D by the name

does not mean I will automatically vote for it.

[blm]

43. But you only posted against Coakley and now smear all Dems with blame that belongs to 100% of GOP's

fascist policies and the 20% of Dems who helped them.

[Craftsman]

44. More like 80% are helping IMHO.

[blm]

45. Their records don't show that, and your record doesn't show any concern for GOP's policies that put

this nation and its working class in such dire straits as they created a national environment that benefitted only the powerful elite.

Why are you so insistent on posting only against Dems as responsible and miscasting their roles as equal to the GOP fascists who pushed the deregulation of financial industry AND provided the legislation that made it possible, in SPITE of the votes of most Dems who were against the deregulation?

Logic and consistency are not your strong points, eh?

[Craftsman]

47. Then were are the job bills, why have we not had criminal investigations

of Wall St. The dems are now jsut as bought off as the rethug have been.

[blm]

49. Just as? Why can't you admit that what happened is BECAUSE of GOP watercarrying for fascists

for decades? It is only a few number of Dems who bought into their bullshit, yet you claim it's ALL Dems.

Tell us what YOU saw the GOP do the last few decades to CREATE this mess and tell us how some Dems helped them do it.

[Craftsman]

52. Because it seems the dems are trying to carry just as much water these days

[blm]

58. Yet you work AGAINST those Dems who aren't doing the watercarrying.

And getting you to admit anything even CLOSE to the truth about GOPs role in runing this nation is harder than pulling teeth.


Your posts against Dems and the working class victims of years of GOP deregulation serves only ONE purpose. But....that's why you're here.

[SpiralHawk]

7. "Shock & Awe, baby. Smirk." - xCommander AWOL & Republicon Cronies

"Why don't you whiney Americans just STFU and live off your Swiss Bank Accounts, the way we Republicon Chickenhawk 'elites' do. Smirk."

- xCommander AWOL Bush & Republicon Cronies
http://1.bp.blogspot.com/_2XQGh7lO9OU/SMsV06BYtoI/AAAAAAAACJU/YHqV-guffb4/s320/GOP+fat+cat.jpg

[blm]

14. Focking BUSH left this country in ruins, didn't he?

.

[Craftsman]

15. Yes, but I have seen very little from the dems to correct it yet

It's the economy stupid is a sword that can cut both ways.

[blm]

18. Describe for us what you have seen from GOP and from Dems. I didn't see any postings from you

against Bush and the GOP rubberstampers who carried water for the financial industry elite all these years.

[Craftsman]

21. I have seen nothing form the GOP, and not much from the dems

both are dancing to the tune ot Wall St. The dems once were the party of the working adn middle classes, but now I doubt they care.

[blm]

25. and yet you post AGAINST Dems who aren't Wall Street whores like 100% of the GOPers.

You wanted Brown to win knowing he was 100% owned by financial industry elite.

Who pushes the idea that 20% is no different than 100% anyway? Those working for the 100%, that's who!

You couldn't answer my question because you are not here to point out the truth about the Republicans or note the 80% difference between a COMPLETELY corrupt (100%) GOP and the 20% of Dems who help them carry water for the fascist elite.

[galileoreloaded]

40. Dems aren't wall street whores??? WHAT!? That's it, you get eaten first.......;>)

[slackmaster]

32. There are two elements to a strategic default - Negative equity is one

The other is lack of a strong desire to live in your home.

People who are only a little underwater on their mortgages often keep their homes because moving is an expensive and inconvenient ordeal. Unless your negative equity position is extreme, eventually you'll come back to the surface as property values rise and you pay down principle.