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The New American Dream: Not Paying For Your Residence

5 April 2011 3 Comments

I’ve talked before about the growing trends of strategic defaults in America.  By strategic default, I mean the person who stops paying his or her mortgage simply because they don’t want to or they see it as a bad financial strategy.

How could it be a bad financial strategy you ask?  Well, when you can live in a house for a couple years without paying your mortgage without the bank evicting you, maybe it’s a good strategy?  Sure your credit will get hit (who cares), and they might come after you later, but hey, it’s a trade off.

For the record, I don’t advise this strategy, otherwise I’d be doing it myself, but I do see why people are doing it.  The moral hazard created by bailing out some and rewarding bad decisions has led to the rise of the strategic defaults.

I know people personally doing this and I don’t blame them one bit.

Why don’t I do it?  Well, for one, I can still pay my mortgage just fine.  Two, I don’t think it will be as clean as some make it out to be – either the banks or the IRS or someone will eventually come after you for money that is “forgiven”.  Three, it’s not worth the stress and the hassle for me at this point in my life.

The following infographic is very interesting and informative:


Infographic from Creditloan.com


  • TaJ said:

    Of course, for people whose mortgages were fed through the securitization grinder, their payments may not even be going to the actual debt holder. So the worst case scenario for someone who's paying their mortgage is being out the money, losing their house (paying your mortgage doesn't really prevent you from being foreclosed on) *and* still owing the debt (though obviously no longer backed by a property).

    The whole mortgage situation in this country is an absolute clusterf***. I've been researching it since about this time last year and I'm continually amazed by new revelations on how screwed it is. I have trouble blaming anyone for strategic defaulting since it's pretty much every person for themselves at this point.

  • fxgeorges said:

    I have no idea why people were buying in some of these metro areas. I bought in the Midwest because rents seems to hover around mortgage payments. There seems like their is not enough on the market to absorb people who plan to move, don't have the down payment or can't borrow cheaply. The coasts and fly-over states are very different markets.

  • Hadenoughalready said:

    Whether the Bank really owns the paper, or some investors, they will be in a much better position to take a loss than some poor hard working smuck living from paycheck to paycheck. The corporations/investors can, will and do bail on a deal that is no longer viable – no guilt…its not personal…just business. Why the double standards? That kind of 'morality' is just enslavement to the corrupt machine that controls. I say squat in your homes America as a form of non-violent protest !