There's no doubt that we're seeing a rise in strategic defaults, even though there is little hard data to back it up. Anecdotal evidence is everywhere, however. You probably know some people who have decided to stop making their payment; they are likely underwater. However in some cases, they have the means to make payments. This is also evident at the commercial level, especially for small office condos and the like. A reeling small business may simply decide to stop paying, knowing that it will be a long, long time before a bank takes any action.

More than 650,000 households have not made mortgage payments in 18 months, according one estimate cited by the New York Times. In 19 percent of those cases, the lender hadn't even begun to take any action to seize the property. This is a huge issue in the servicing industry. And frankly it has some implications for mortgage-backed securities, perhaps helping to keep a lid on toxic-asset valuations.

I doubt we'll see this situation reverse anytime soon. The attitude on the part of some borrowers seems to be: you got us into this mess, so we're just going to ride this out for a while. 

For more:
- here's the article

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