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Study Captures Changing Attitudes Toward Strategic Default in Nevada

In hard-hit state Nevada, more than 60 percent of homeowners are underwater, and about one in 16 properties received a foreclosure notice in 2011, according to a 2012 ""Face of Foreclosure"":http://www.faceofforeclosure.com/ study released by the ""Nevada Association of REALTORS(R)"":http://www.nvar.org/home.aspx (NVAR).

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With negative equity and foreclosures seeming so commonplace in the state, the stigma of strategic default appears to be fading.

""This year's report shows it's more socially acceptable to strategically default on your mortgage,"" said NVAR President Blane Johnson. ""I hope banks and government leaders will look at this to help them get ahead of these issues.""

Strategic default is when homeowners decide to stop making their mortgage payment even though they can afford the property; oftentimes this type of defaulter is underwater.

When surveyed on the topic, 51 percent of those who were foreclosed on said there is nothing wrong with strategic default as a financial decision while 36 percent said homeowners should not choose to strategically default and have a legal and ethical obligation to make their payments if they can.

Among all Nevada residents, opinions were split. Forty-five percent said strategic default is acceptable while 45 percent said homeowners should not strategically default.

Also, 27 percent of those who experienced foreclosure said they strategically defaulted compared to 23 percent in the 2011 report.
For the individuals who lost their home to foreclosure, 40 percent said they were advised by their lender or financial advisor to stop making payments to qualify for assistance.

Fifty-three percent of those who experienced foreclosure in the past 12 months cited job loss as the main reason, but many also faced additional hardships, such as having another member added to their household (20 percent), unexpected medical bills (41 percent), and the death of a primary wage earner (6 percent).

Among those who have been foreclosed on, 30 percent said the government should stay out of the way and not offer assistance, while 58 percent said the government should step in and help.

Only 9 percent of those surveyed said they believe government foreclosure programs are helping the situation, and 58 percent said the government programs are not really having an impact.

The surveyed included 500 individuals currently undergoing, recently experiencing, or narrowly avoiding home foreclosure in Nevada since May of 2010 and a separate set of interviews was conducted among Nevada residents who were at least 18 years old.

About Author: Esther Cho

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