What is a strategic default?
A strategic default is when a borrower stops making mortgage payments even when they have the financial ability to make the payments. Accounting for close to one-fifth of troubled mortgages, strategic defaults have become very popular among homeowners whose homes are underwater or have negative equity and have fuelled the mortgage crisis. Strategic defaulters stop making payments and “walk away” from the property, allowing it to go into foreclosure. Mortgage lenders will pursue strategic defaulters through deficiency judgments, where possible.