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Intentional defaults grow to 35 percent

A foreclosed home is seen for sale on 16th Street NW in Washington on August 22, 2010. More than 2.3 million homes have fallen into foreclosure since the recession began in later 2007, according to RealtyTrac Inc. Economists expect the number of foreclosures to grow into 2011. UPI/Kevin Dietsch
A foreclosed home is seen for sale on 16th Street NW in Washington on August 22, 2010. More than 2.3 million homes have fallen into foreclosure since the recession began in later 2007, according to RealtyTrac Inc. Economists expect the number of foreclosures to grow into 2011. UPI/Kevin Dietsch | License Photo

NEW YORK, April 22 (UPI) -- The percentage of defaulting U.S. mortgages representing owners who purposefully walk away from their loans is growing, credit score company FICO said.

The percentage is considered an estimate, as "strategic defaulters have all the incentive to disguise themselves as people who cannot afford to pay," a report written by European University Institute, Northwestern University and University of Chicago researchers said.

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Nevertheless, The Washington Post reported Friday FICO believes the percentage of homeowners choosing to give up on their loans in September rose to 35 percent compared with 26 percent in March 2009.

Signs that indicate a homeowner has planned a default include keeping up with other debt payments and signing up for new credit cards before the mortgage default impacts their credit score.

"This is a planned activity, not an impulse activity," said FICO chief analytics officer Andrew Jennings, who called strategic defaulters "savvy people."

Research shows strategic defaulters tend to be young borrowers with high credit scores and higher than average mortgage costs, who live in homes considered "underwater," which refers to property with values that have fallen below what is owed on the loan.

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Some consider it immoral to walk away from a loan, but those who are angry at banks and those who know others who have walked away from a loan are more likely to do the same, research shows.

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