Over the past six months, it has become clear that the banking industry and its regulators recognize that the problem of strategic default is both real and growing. They understand not just the notion of what it is, and how to begin to identify it, but also the need for a preemptive solution.
Strategic default is not just a problem for banks, however. In every traditional mortgage transaction, there are at least five constituencies that benefit from timely and consistent mortgage payments. It's not merely the borrower and lender/servicer, but the investor, mortgage insurance providers, state and local municipalities and the U.S. taxpayer (by way of our indirect ownership of the government-sponsored enterprises that guarantee timely payment of principal and interest).