A new report suggests the number of strategic defaults might be well past the peak.
Deliberate defaults by borrowers who can afford to make their mortgage payments accounted for an estimated 19 percent of all defaults during the second-quarter 2009, according to the Experian-Oliver Wyman Market Intelligence Report released today.
Experian defined a strategic default as a mortgage that has been delinquent for at least six months from the initial default date.
First-half 2009 strategic defaults declined to 355,000 as new delinquencies tapered off. The report suggested strategic defaults might have peaked at the end of 2008.
In California, one of the markets with the steepest home-price declines, strategic defaults were running around 80 times higher than the national rate. Florida’s rate was 53 times higher.
Among the biggest abusers are investors with multiple first mortgages, “super-prime” borrowers with VantageScores of at least 901 and high-balance borrowers.
But the report said “there is reason to believe the phenomenon may have peaked, or be close to peaking.”
Experian noted that strategic defaulters with home-equity lines-of-credit are more likely to maintain their HELOC payments than their first mortgage payments. Around half of strategic borrowers were likely to default on their first mortgages before their HELOCs, versus around 30 percent for the overall population.