WASHINGTON – April 27, 2011 – People who default on mortgages they can afford to pay are savvy about credit and tend to have better credit histories than other defaulters, new research shows.
FICO, the firm that created the widely used FICO credit score, studied credit bureau data to develop what it says is a more accurate portrait of strategic defaulters. FICO defines them as people who are underwater on their mortgage – owing more than their home is worth – and more than 90 days delinquent on payments but current on other credit lines.
Compared with other mortgage defaulters, strategic defaulters generally:
• Have higher credit scores. The majority of them have credit scores above 620, FICO’s research shows. FICO scores go up to 850.
• Use credit more judiciously. More than 35 percent of non-strategic defaulters max out their credit cards vs. less than 10 percent of strategic defaulters.
• Have not been in their home very long.
• Shop for new credit card lines before they strategically default.
“They’re getting their life in order,” says Andrew Jennings, chief analytics officer at FICO.
Lenders have traditionally used the degree of home price depreciation as a basis for predicting strategic defaults. But FICO’s research gives a more complete picture, Jennings says. The company last week announced new tools that it says will help lenders better identify strategic defaulters before they default.
Other companies, including CoreLogic, have launched similar products as the strategic defaults continue to erode home values.
Read More at
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=259245
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I do not agree with Strategic default. I think it should be illegal. Even if they are upside down. If a person can pay their debt service then they should. If the do a Strategic Default then the MAX Credit score should be 600 for the next 20 years no matter what they do and even if they pay everything in full and on time. This should be a FEDERAL LAW. It is making the economy continue to go down. This hurts everyone.
If a person can not pay their mortgage and they can prove a hardship, I understand and we should help them. If a person CAN pay then they should. Thats called Being a responsible adult.
FICO, the firm that created the widely used FICO credit score, studied credit bureau data to develop what it says is a more accurate portrait of strategic defaulters. FICO defines them as people who are underwater on their mortgage – owing more than their home is worth – and more than 90 days delinquent on payments but current on other credit lines.
Compared with other mortgage defaulters, strategic defaulters generally:
• Have higher credit scores. The majority of them have credit scores above 620, FICO’s research shows. FICO scores go up to 850.
• Use credit more judiciously. More than 35 percent of non-strategic defaulters max out their credit cards vs. less than 10 percent of strategic defaulters.
• Have not been in their home very long.
• Shop for new credit card lines before they strategically default.
“They’re getting their life in order,” says Andrew Jennings, chief analytics officer at FICO.
Lenders have traditionally used the degree of home price depreciation as a basis for predicting strategic defaults. But FICO’s research gives a more complete picture, Jennings says. The company last week announced new tools that it says will help lenders better identify strategic defaulters before they default.
Other companies, including CoreLogic, have launched similar products as the strategic defaults continue to erode home values.
Read More at
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=259245
==================================
I do not agree with Strategic default. I think it should be illegal. Even if they are upside down. If a person can pay their debt service then they should. If the do a Strategic Default then the MAX Credit score should be 600 for the next 20 years no matter what they do and even if they pay everything in full and on time. This should be a FEDERAL LAW. It is making the economy continue to go down. This hurts everyone.
If a person can not pay their mortgage and they can prove a hardship, I understand and we should help them. If a person CAN pay then they should. Thats called Being a responsible adult.
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