Are Strategic Defaults Overblown?

Concerns that vast numbers of homeowners are going to walk away from underwater homes that they can afford to pay are overblown, say U.S. economists at Banco Bilbao Vizcaya Argentaria SA.

The economists cite data showing that there aren’t any significant differences in the growth of foreclosures in states where lenders can pursue borrowers’ assets and in states where they can’t.

HOWEVER

But that theory contradicts the fact that one of every 70 homes in Las Vegas received a foreclosure filing in October.

For 19 of the last 20 months, the city has held the highest rate of foreclosures for any metro area. And with more than 80% of its homeowners underwater on their mortgage in the third quarter, Las Vegas continues to hold the nation’s top spot for negative-equity homeowners and rates of foreclosure.

Since February 2009, Las Vegas has held the highest foreclosure rate every month except November 2009 when Merced, Calif., passed it, according to RealtyTrac data. Merced was also the last city to have the most foreclosures 21 months ago. That February, the Las Vegas foreclosure rate was at one in 60, more than seven times the national average.

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