House Refinance Center
Banks Slow To React To Strategic Defaults
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Strategic Default Leaves Consumers
With Millions Of Dollars To Spend
' New stimulus: Strategic default taking it to the bank.'












Imagine not paying your mortgage for 18 months, but you are still living in the house. On a
$3,000 a month mortgage that is $54,000. Where does all that money go?

Strategic defaults have provided free housing for millions of homeowners and at the same time,
an economic stimulus to the American economy.

Defaulters living in their homes and not making a mortgage payment are collectively saving an
estimated $2.6 billion a month. This figure is from the Wall Street Journal, using data from LPS
Applied Analytics and from rent data from the Commerce Department.

The average borrower hasn't paid the mortgage in 16 months. The big question is where does
this money go?

For many homeowners the money goes towards everyday living expenses. The car payment is
taken care of. Medical, dental and other healthcare costs, food and utilities are covered. For the
couple who have worked two jobs for years to put their kids through college or to just pay the
mortgage, this is a windfall. They can now go on that vacation and enjoy themselves for a couple
weeks.

In many situations the money replaces the income from a job loss, or it subsidizes
unemployment benefits.

Some defaulters have hit the jackpot by keeping the house and renting it out. Just imagine, a
defaulter saves $2,000 a month in mortgage payments, then rents the house for $1,700 a month.
And some are doing this for 16 months or longer.

Stop paying the mortgage and getting a rental income is a slap in the face to all home owners
who are still struggling to make ends meet. It is also demoralizing to the local governments and
school districts that can not collect taxes to pay for the services needed to run a city. Schools
need to be funded. Garbage has to be collected. Cities are losing the battle in trying to balance
their budgets. As a result of this shortfall, teachers are fired or forced into early retirement. Hiring
additional firefighters and law enforcement officers is put on hold, and many community services
are scaled back.

Strategic default is a complex issue and should be judged on a case by case basis. I am for
using strategic default. What I can't get my mind wrapped around is renting out the house. This
seems to me as a "for profit" transaction.


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