The industry calls these strategic defaults, and their numbers grew to 588,000 in 2008 double the total in 2007 and well beyond most earlier estimates.

The study determined:

Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all. Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida. Two-thirds of strategic defaulters have only one mortgage. Most likely to default are homeowners with large balances and the highest credit ratings.

Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters are clearly sophisticated and look on the decision to default as a business strategy.

Well, Im $200,000 in the hole on my house, and yes, Ill damage my credit, Tantia says defaulters admit. But they see the credit hit as a less onerous choice to their long-term bottom line than continuing to own the house.

Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)