A foreclosure agency suggested borrowers may be more encouraged to strategically default due to the expectation that little will change over the next four years surrounding policies on housing and the economy.

Strategic default occurs when a borrower stops making mortgage payments on a property he or she can afford. Typically, strategic defaulters are also underwater. In a recent survey of YouWalkAway.com customers, 47 percent said they believe the Obama administration had no effect on the foreclosure crisis.

About 31 percent believe the administration had a negative effect, and 22 percent of respondents said they think the Obama

administration had a positive effect on the foreclosure crisis, the agency reported.

Due to the perception that housing issues are not a priority for the current administration, YouWalkAway said, “underwater homeowners who were previously undecided about whether or not they should strategically default are choosing to do so given the election results.”

Of the YouWalkAway respondents questioned, 30.4 percent are registered Republicans and 39.7 percent are registered as Democrats, while 29.9 percent are independent.

Most of the YouWalkAway customers, or 89.6 percent, began their foreclosure during President Obama’s first term.

When asked about the administration’s impact on the economy, 39 percent said they believe it had a positive effect, while 41 percent said it had a negative effect. Twenty percent cited no effect.

However, YouWalkAWay stated the expiring Mortgage Debt Relief Act of 2007 has an even greater influence in encouraging borrowers to strategically default. The act allows borrowers to be excluded from paying taxes on forgiven debt from a foreclosure, short sale, or modification. With the act set to expire at the end of this year, homeowners don’t want to risk facing a tax burden if the act is not extended, according to the agency.

 

by Esther Cho