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Through a little-known loophole called strategic default, an increasing number of indebted homeowners are now turning the tables on their banks. Last year only 15% of homeowners walked away from their mortgages, but that's up to 27% now as more people are left with monthly payments that far exceed the reduced value of their properties.
Those taking advantage of this action are not bums as one might expect, but are rather people with high credit scores acting in their rational financial best interest. Jeff Horton, for example, an IT manager in Orlando, FL saw the value of his house and condo both cut in half by the recession. He realized he could relocate to another home in town for less than half of what he was paying for his mortgages, even after the extra income of renting out one of the properties. The move reduced his credit score from a pristine 750 down to 520, but in two years it recovered to 600. This unconventional method has allowed citizens to show banks that they aren't the only ones who can figure out how to bail themselves out. Read the full article.
