Homeowners who take the path of strategic default on their mortgage go from having a perfect payment history to making no mortgage payments at all. Most financially distressed people try to keep up with their mortgage payments at the expense of other bill payments.
It is unclear how many of these million dollar-and bigger-homes are primary or secondary residences. While it can be a tough choice to walk away from an underwater mortgage for your primary residence, defaulting on a loan for a secondary or vacation home is far less difficult and might partly explain why this subsection of home owners is defaulting at such high rates.
Some cite their banks' refusal to work out new terms based on the new value of their homes. Others simply say that they aren't going to pay more money to own a home – with all of its attendant maintenance and repair bills – when they could pay half as much and have the landlord take care of that.
Home owners with underwater mortgages are in a tough place these days; with a long climb back out of the recession and more economic uncertainty likely in the near future, it is hard to know at which point you are better off holding on to a home that is worth far more than you owe on it and at which point you’re better off walking away from it.
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