Home Owners Torn on Strategic Default: Right or Wrong?
Forty-five percent of Nevada home owners recently surveyed say “there is nothing wrong” with walking away on your mortgage obligations, according to a new report, “Face of Foreclosure,” released by the Nevada Association of REALTORS®. On the other hand, an equal number of home owners say home owners have a “legal and ethical obligation to pay their mortgage if they can.”
The number of home owners who find “strategic default” socially acceptable is growing in the state, which has consistently had one of the highest foreclosure rates in the country the last few years. In 2011, 23 percent of Nevada home owners who lost their home to foreclosure said they walked away from their mortgage. In 2012, 27 percent of foreclosed home owners say they strategically defaulted on their mortgage.
Strategic default is when a home owner is financially able to make their mortgage payments but decides to stop, usually because the property is underwater.
“This year’s report shows it’s more socially acceptable to strategically default on your mortgage,” says Blane Johnson, NVAR’s president. “I hope banks and government leaders will look at this to help them get ahead of these issues.”
For those who decided to walk away from their mortgage, 40 percent said they had been advised by their lender or financial adviser to stop paying their mortgage so that they could qualify for more assistance with their home loan.
NVAR is calling on lenders to do more to help distressed home owners, such as through refinance and loan modification programs or streamlining the short sale process so that fewer home owners will opt to walk away from their mortgage.
The survey also found that despite the plague of foreclosures in the state the last few years, most Nevadans still overall favor home ownership. Nearly 80 percent of home owners surveyed who have faced foreclosure say they want to buy a home again one day, according to the report.
Supplementing the report, NVAR developed a video featuring interviews with local home owners, real estate and mortgage professionals about foreclosures in the state. You can view the report and video at www.FaceOfForeclosure.com.
Source: “Face of Foreclosure Report,” Nevada Association of REALTORS® (2012)
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