It's generally estimated that about a third of all mortgage foreclosures are simply voluntary, people who can afford their monthly payments but throw in the financial towel and make a strategic decision to walk away from their homes and loans. Now a new system says it can predict who will walk and who will stay.
“FICO Labs researchers,” says the company, “have found that, as a group, strategic defaulters tend to be more savvy managers of their credit than the general population, with higher FICO Scores, lower revolving balances, fewer instances of exceeding limits on their credit cards and lower retail credit card usage. This indicates that strategic defaulters display a different type of credit behavior than distressed consumers who miss payments.”
Forgive me, but does this not also sound like the decisions of someone with sane financial practices? And don't people who handle credit well, by definition, handle credit differently than distressed borrowers, people who have lost their jobs, gotten divorced, had an auto accident or faced a health emergency?
Consumers with bad credit have a tough time getting loans and now, perhaps, people with good credit will also have a tough time because a large number of walk-away homeowners also have good credit. This is like saying we should ban milk because — statistically — as children most bank robbers drank the stuff.
It's generally estimated that about a third of all mortgage foreclosures are simply voluntary, people who can afford their monthly payments but throw in the financial towel and make a strategic decision to walk away from their homes and loans. Now a new system says it can predict who will walk and who will stay.
“FICO Labs researchers,” says the company, “have found that, as a group, strategic defaulters tend to be more savvy managers of their credit than the general population, with higher FICO Scores, lower revolving balances, fewer instances of exceeding limits on their credit cards and lower retail credit card usage. This indicates that strategic defaulters display a different type of credit behavior than distressed consumers who miss payments.”
Forgive me, but does this not also sound like the decisions of someone with sane financial practices? And don't people who handle credit well, by definition, handle credit differently than distressed borrowers, people who have lost their jobs, gotten divorced, had an auto accident or faced a health emergency?
Consumers with bad credit have a tough time getting loans and now, perhaps, people with good credit will also have a tough time because a large number of walk-away homeowners also have good credit. This is like saying we should ban milk because — statistically — as children most bank robbers drank the stuff.
http://www.ourbroker.com/mortgages/can-we-predict-mortgage-walk-aways-042511/#axzz1KX3C0EYx
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