Donna Hunt strategically defaulted on her home. It all began in 1995, when Hunt became a registered nurse. She had been divorced and single for 30 years, “one of those poor slobs just struggling along,” she said. But after she took a job working as a psychiatric nurse in a jail near Phoenix, Hunt finally felt like she was earning a living. “All of a sudden, boom, I was making money. I was piling up money in my checking account without really knowing it because my income jumped so dramatically,” she told HousingWire. Lenders are worried there are more borrowers like her out there. In 2002, Hunt was renting a 650-square-foot bungalow in Phoenix close to her work. She liked it, she said, but it was cramped. She began getting fliers in the mail promoting low mortgages rates and great deals on houses. That summer, she enlisted the services of a real estate agent, who began showing her homes within Phoenix’s city limits, but everything in her price range required too much repair work. Her real estate agent started showing Hunt homes in Phoenix’s burgeoning suburbs. Hunt was overtaken by the housing inventory in the outskirts of Phoenix. “I just got seduced,” she said. Hunt, armed with a 778 credit score and a $6,000 down payment, took out a 30-year, 6 percent fixed-rate mortgage and purchased a brand new, 1,900-square-foot, three-bedroom, two-bathroom house in El Mirage, a suburb 25 miles northwest of downtown Phoenix, for $138,000. “Going from a 10-minute commute, I was now at 40 to 45 minutes, but it was a beautiful house,” Hunt said. … Then the beginning of the housing crash was taking root in Phoenix. A neighbor of Hunt’s who was an architect lost his job when his firm didn’t have enough work for him. His home would later go into foreclosure. Others followed. For six months, the only prospective buyer to look at her home was a neighbor’s relative who was considering moving closer to family. At first, Hunt thought that it was just her suburb. “Surprise, Arizona, is next door and they seemed to be doing OK, it’s a little bit classier area,” she said. “But it became more clear to me that things were turning bad everywhere.” Concerned about her home’s declining value, Hunt turned to the Internet to learn about the housing market. She found a number of bloggers writing about the crash in the subprime mortgage market and the collapse of Phoenix housing. A local media outlet created a Web page with a digital map of foreclosures in the Phoenix area. “El Mirage had one of the highest foreclosure rates. There were hundreds of them,” Hunt said. “I thought, oh my God, it’s imploding and there’s nothing I can do.” … Before she defaulted, Hunt said she needed a plan where she would still have a place to live. She knew she was about to destroy her excellent credit, and with nearly $200,000 in outstanding mortgage debt, it was unlikely she could take out another mortgage. She also believed that with house prices sliding, anything she purchased would depreciate as quickly as her current home. She took out a $40,000 loan to buy a 1,200 square-foot mobile home, explaining to the lender that her house was on the market and she was downsizing. “Of course, my house was up for sale, but nobody was buying it,” she said. Hunt made her last mortgage payment in October 2007. In the months that followed, she moved her belongings out of the El Mirage house and into the mobile home, where she lives at a retirement community in Phoenix. She began to receive letters from her bank notifying her of her delinquency. “You can have it back,” Hunt told her servicer in February 2008. TO READ THE FULL STORY, SUBSCRIBE NOW.

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