Are You Likely to Walk Away From Your Mortgage?

Lita Epstein
Updated
Who is most likely to walk away from their mortgage?
Who is most likely to walk away from their mortgage?

Do borrowers who decide to walk away from their mortgages by choice share certain characteristics? The answer appears to be yes.

A leading credit bureau partnered with a management consulting firm to figure out who is strategically defaulting and how lenders can get a better handle on risky borrowers. Experian and Oliver Wyman found that in the first half of 2009, 355,000 homeowners strategically defaulted, which is a 53 percent increase over the same period in 2008. (These statistics were included in the conclusions of the Q2 2010 report, "Understanding Strategic Default in Mortgages.")

The researchers define "strategic default" (or "walk-away") as a "default behavior in which the borrower has the ability to make monthly payments on his mortgage, but chooses not to do so, most likely for reasons of negative equity."

So what are the key characteristics of a strategic defaulter?

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