how to: strategic default. watch for deficiency

http://www.washingtonpost.com/business/economy/strategic-defaulters-pay-bills-on-time-and-plan-ahead-study-finds/2011/04/21/AFcGQSLE_story.html A growing body of research shows that these so-called “strategic defaulters” defy the tell-tale characteristics of most people whose loans go bad. They pay their bills on time, rarely exceed their credit-card limits and hardly use retail credit cards,... [more]

http://www.washingtonpost.com/business/economy/strategic-defaulters-pay-bills-on-time-and-plan-ahead-study-finds/2011/04/21/AFcGQSLE_story.html A growing body of research shows that these so-called “strategic defaulters” defy the tell-tale characteristics of most people whose loans go bad. They pay their bills on time, rarely exceed their credit-card limits and hardly use retail credit cards, according to a study released Thursday. And they plan ahead. They know their credit scores will take a hit after they fall behind on their mortgages, so they tend to open new credit cards in advance of defaulting, according to Thursday’s study, conducted by FICO, the firm that created the nation’s most widely used credit scoring system. “These are savvy people who organize themselves,” said Andrew Jennings, FICO’s chief analytics officer. “This is a planned activity, not an impulse activity.” A team of researchers estimated that 35 percent of defaults in September may have been strategic, up from 26 percent in March 2009. But they acknowledge in a report published last month that the numbers are tough to tease out because “strategic defaulters have all the incentive to disguise themselves as people who cannot afford to pay,” according to the report by researchers from the European University Institute, Northwestern University and the University of Chicago. That’s because lenders have become more aggressive about trying to recoup money lost on foreclosures, and they’re chasing after borrowers who they suspect have skipped out on a loan they could have paid. In many localities — including Virginia, Maryland and the District — lenders have the right to pursue those borrowers and collect the difference between what the property sold for in foreclosure and what the borrower owed on it, also called a deficiency. [less]