Fewer distressed borrowers consider defaulting on mortgage debt
Fewer distressed borrowers are considering a strategic default to evade cumbersome mortgage debt, according to Fannie Mae's latest survey of homeownership trends. A strategic default is a tactic employed by upside-down borrowers who believe its better to default on a mortgage loan than to keep up with monthly payments. Only 19% of delinquent borrowers polled by Fannie in January said they are "seriously considering" a strategic default. That compares to 25% in January of 2010. While fewer borrowers are employing "cut and run" strategies, the market has yet to restore optimism in the American dream of owning a home. In fact, Fannie says even though 78% of respondents believe housing prices will hold steady or increase in 2011, only 64% believe buying a home is a safe investment, compared to 70% a year earlier. The majority of mortgage originations in 2010 is from households refinancing their property debt. "Over the course of the last year, we gained deeper insights into Americans' confidence in the strength of the housing market and the economic recovery," said Doug Duncan, Vice President and Chief Economist of Fannie Mae. "But most respondents to our survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future." When it comes to the next generation of buyers — 18 to 34 year olds — about 59% believe buying a home is still a solid investment. Write to Kerri Panchuk.