FICO, the leading provider of analytics and decision management technology, today announced additional results from its latest quarterly survey of bank risk professionals, finding that 46% of respondents expected the volume of strategic defaults in 2012 to surpass 2011 levels.
After five years of a brutal housing market, many people now view their homes more objectively and with less sentimentality.
- Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs.
“Regardless of legal or ethical issues around strategic defaults, lenders must account for this risk when they evaluate mortgage applications in declining markets. Many homeowners who find themselves upside down on mortgages in the future are likely to consider strategic default as an acceptable exit strategy.”
Concerns about strategic defaults were also reflected in response to a question about the consumer payment hierarchy. When asked if the current generation of homeowners considers their mortgage to be their most important credit obligation, 49% of bankers said no. Only 29% said yes.
Although concerns remain regarding strategic defaults, other signs point to growing stability in the housing market. More respondents (26%) expected delinquencies on mortgages to decline in the coming months than at any previous time in the two years FICO has been conducting this survey. Furthermore, 53% of respondents said the housing market as a whole would improve by the end of 2012, compared to 24% who said the market would deteriorate.