Speculators Make Up Bulk of Mortgage Defaults: WSJ
People who bought houses as an investment rather than to live in them make up an important proportion of mortgage defaults, a survey showed on Friday, casting a clearer light on the role of investors in the current credit crisis.
The survey by the Mortgage Bankers Association (MBA) quoted by the Wall Street Journal found that in Arizona, California, Florida and Nevada, between 21% and 32% of defaults on prime-quality home loans were by people who did not occupy the properties.
Overdue payments are piling up in the four states, and defaults were high on both prime and subprime loans, the WSJ said.
It said the four states were among those favored by speculators during the housing boom, with many buying homes in the hope of selling them quickly at a profit.
But with that strategy backfiring after home prices tumbled, investors just "simply walked away from their mortgages," Doug Duncan, chief economist of the MBA, told the paper.