Wednesday, July 15, 2009

Walking Away Study

This article describes some interesting research on walking away from mortgages. The results make sense to me.

The study found that 26% of the record numbers of home mortgage defaults across the country are "strategic"

An important factor in walkaways, according to the researchers, is the level of foreclosures owners observe in their local community and their personal acquaintance with owners who have defaulted. In the latter case, owners who know someone who defaulted strategically are 82% more likely to default themselves

If it is true, we should expect walk away foreclosures to keep increasing, even after we some the effects of ARM resets and unemployment decrease. It also explains why loan modification plans without principal adjustments are doomed to fail in much of California.

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