Jul 18 2010
Lenders Watching For Strategic Defaults Closely
Fred Weaver and Kevin Kauffman, Arizona’s supreme short sale team, is chatting about a current expose on the subject of strategic defaults. Apparently Experian finds that 19% of mortgage defaults in the second quarter of 2009 were strategic. Firstly, the statistics are fairly old. Also worth noting is the fact that there is no lucid description of who is strategic defaulting and who is not. Apparently, they are defining strategic by looking at financial and credit reports and assuming that the home owner could have paid their mortgage. This is 80% more than 2005, which is kind of obvious, isn’t it.
Kevin’s estimates are that existing short sales that are strategic defaulters is approximately 50%. Fanniemae has a distinctive retort to strategic defaulters which will be discussed tomorrow. Yet, before we do that, we should fill you in on something that you may not be aware of. Many of your lender servicers are pulling credit on your borrowers and you will almost certainly have some conversations with negotiators concerning strategic defaults. The strategic default is no mystery now. So, logically, it is being scrutinized even more.
Kevin and Fred were first talking about the strategic default in early 2008. There were lots less people doing it then than there are today. We noticed it and thought it was extremely interesting. In Arizona, people are realizing that the market has done nothing but get worse. The solutions that the government and banks have put out there have mostly been political stunts.
At the end of the day property owners still own homes that are worth $200,000 that used to be worth $500,000. We are not saying that everyone ought to do it. However, everyone ought to mull over it because it is a wise business choice. Defaulting is a contractual alternative.
Get powered up by Kevin and Fred at Short Sale Power Hour by the Short Sale Specialists of Arizona
