A "strategic default" occurs when a mortgage holder lets the property go into foreclosure even though the debtor can still afford the payments, typically when the value of the property has declined so much that continuing to make payments is financially stupid. The debtor can't get a mortgage mod because they are otherwise financially sound.
On Sunday, May 9, CBS news' 60 Minutes aired a segment on Strategic Default, which has now gone viral.
Background to the problem:
- Currently, 1 in 4, or 11.2 million mortgageholders owe more than their house is worth.
- SNL reports that Strategic Defaults Reach 31%.
- 32% of all homes sold in March went for less than what sellers paid for them.
- Fannie and Freddie seek Billions, again, after First Quarter 2010
- Video: Full version of 60 Minutes segment
- Video: Yale Economist Robert Shiller (of Case Shiller Index) on the contagion of walk-aways.
- Video: Info on the website, Youwalkaway.com
- More videos here.
- BusinessInsiders handy guide on How to Walk Away is here.
- Brent White is a law professor who says underwater homeowners should be walking away in droves.
- The Colbert Report covers the phenomenon.