Over the past few months, it’s become clear that a lot of homeowners are strategically defaulting on their homes. In other words, they’re intentionally walking away from their mortgage obligations because they owe significantly more than their home is worth, even if they can afford to keep making the mortgage payment.
But what then? Once you’ve defaulted, you won’t be able to get a new mortgage for a long, long time. Well… According to a recent Bloomberg article, some homeowners are starting to “buy and bail.” In other words, they’ll acquire a new house before they walk away from the old one.
While “buy and bail” constitutes fraud if the borrower lies on their loan application, this strategy is most often employed by those with a big paycheck and relatively little debt, as they’re more likely to legitimately qualify for financing on a second home. Lenders are then left holding the bag.
What do you think?
Are there any circumstances under which you’d consider a strategic default?