Jumbo Mortgage Strategic Defaults Looming

We have not seen as big a drop in the higher priced homes but beware it could be the calm before the storm.  Moody’s just put out a report  that states “More than 80% of these loans are still current but more than half of them are underwater.”

This is mostly attributed to the stronger financial position of larger borrowers and the long delays if the foreclosure process.

Of the 80% of jumbo borrowers more than 50% of them are underwater. I believe this will lead to many more “strategic” defaults meaning those borrowers will just walk away.  Makes sense if you live in a house you paid $825,000 and still owe $700,000 when the person down the street just bought a similar house for $500,000.

With the stigma about foreclosure seeming to be less important these days, it gets easier for someone to make the decision to walk away.

See the original article here.

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