Podcast: | Download

The Real Story learned a new term today while talking to John Burns of John Burns Real Estate Consulting. The term is “strategic default” and it refers to a decision made by a homeowner to stop making loan payments in spite of having the financial wherewithal to make those payments. The strategy here is to live essentially mortgage free for however many months it takes for the lender to foreclose on the property. This is becoming a matter of concern, as greater numbers of people who are underwater in their home purchases weigh the pros and cons of going into default on their home loans.

Will the actions of these walk-away homeowners add to the shadow inventory of foreclosures yet to hit the market? You bet.