Strategic Default Increasingly Common Among Baby Boomers
According to YouWalkAway.com, Baby Boomers are increasingly likely to strategically default on their mortgages. YouWalkAway surveyed its customers and then created graphs from the the data it received.
Some of the conclusions derived from the survey make sense given the current state of the housing market. Many Boomers are at or are reaching retirement age. We can presume that at least some Boomers own homes that are currently underwater. Baby Boomers are more likely to have depleted their retirement savings in an effort to keep making mortgage payments because they are more likely to view defaulting on a mortgage as a moral failure.
Of the defaulters surveyed, 68% walked away due to being underwater, and 97% would recommend strategic default to others in the same situation. 88% stated that they struggled with the morality of defaulting on their loans.
On the whole, it would appear that the social stigma of strategic default is the main factor that borrowers must overcome before committing to leaving a bad investment behind. Oddly enough, this practice is highly common in the business community. Plenty of companies utilize Chapter 11 bankruptcies to rid themselves of bad debts and restructure financially.
As I have noted in previous posts, strategic default involves a significantly higher level of strategy in Illinois than in other states because Illinois allows lenders to pursue borrowers for the remaining loan balance after a foreclosure sale. This means that underwater borrowers are at significant risk of a deficiency judgment being levied against them unless they take steps to minimize their risk and created a predictable outcome.
If you live in Illinois and are significantly underwater on your home, you may want to consult with a licensed attorney before taking any drastic actions. Strategic defaults are done over time, not on a whim. They require planning and forethought.