When a borrower decides to stop making payments on an existing mortgage loan despite having the ability to make payments (typically when the home has lost value), this is more commonly referred to as a(n):

Question

Quizplus · Accepted Answer

A strategic default is when a borrower intentionally stops making payments on a mortgage even though they have the ability to make payments, usually because the home has lost value and they owe more on the mortgage than the home is worth. This is different from statutory redemption (the right of a borrower to reclaim a property after a foreclosure sale by paying off the debt) and reverse mortgages (a type of loan where the borrower receives payments based on the equity in their home). Equity redemption is not a common term in the context of mortgage loans.

When a Borrower Decides to Stop Making Payments on an Existing