Study Finds Good-Credit Borrowers More Likely To Strategically Default

Borrowers who have high credit scores when they apply for mortgages are 50% more likely to strategically default, according to data from credit bureau Experian and consulting group Oliver Wyman.

The companies analyzed 24 million credit files in their study of strategic defaulters' behavior, according to a Los Angeles Times article.

According to the companies' research, the number of strategic defaults more than doubled from 2007 to 2008, resulting in 588,000 cases nationwide in the latter year. The researchers also found that borrowers who decide to walk away from their payment obligations often have perfect payment histories prior to deciding to default.

Strategic default activity was heaviest in markets with the high percentages of underwater borrowers, Experian and Oliver Wyman noted. Levels of strategic defaults were 68 and 46 times higher from 2005 to 2008 in California and Florida, respectively. ‘In most other parts of the country, defaults were about nine times higher in 2008 than in 2005,’ the Times reports.

SOURCE: Los Angeles Times


Please enter your comment!
Please enter your name here