While foreclosures remain at high levels, research shows that one out of every five of them are considered to be strategic defaults. Those people who have the means to pay for their mortgage, but choose to stop paying it, for whatever reason, are considered to be strategic defaults. This rate also remains unchanged from the end of 2008, yet it represents a 53 percent increase from the same time frame a year ago.
The recent research shows that those states that are seeing the largest decline in home values are also the ones having the highest rate of strategic defaults. These states include several in the West, as well as Florida.
California has been experiencing an exceptionally high rate of strategic defaults on foreclosures. In fact, during the first half of 2009 there were 80 times more strategic defaults in the state, as compared to the same period in 2005.
While there have been many homeowners opting for strategic defaults because their home value has plummeted, leaving them unable to sell it, it is believed that many others who follow this route are investors. Many people have chosen strategic default, feeling that they have no other choice in being able to get out from under their mortgage.
In light of the increase in homeowners strategically defaulting on their mortgage, many lenders are firing back and planning legal action. Recently, Fannie Mae even began spreading the word about how they will seek legal recourse against those people who strategically default on their mortgages. In addition, the mortgage defaulters can now expect to go seven years before being able to obtain another mortgage loan, unless they can prove that the foreclosure came as a result of financial difficulty.