[quote=davelj]So, the servicers are probably losing money on their “core” servicing business AND they have a cashflow problem related to servicing the foreclosures. I think you can see how that would lead to some of the problems we’re seeing today.[/quote][quote=sdduuuude]The best word I can think of is “stuck.” The banks are stuck. I’d say – by their own glue, too.[/quote]

I think this is a good way of putting it. Nobody wants to foreclose and take the loss.

But, now they have a triple whammy. Dealing with people purposely defaulting because:

1. They are in negative equity positions.
2. They know the banks/servicers aren’t going to foreclose anytime soon.
3. They see others doing it with minimal consequences

These are three VERY compelling reasons to strategically default as it gives them plenty of time (years?) to save cash. If I as a home owner had this option I would definitely contemplate “using” the bank, moral or not.

IMO, the contagion effect is going to be monumental unless they start processing these defaults/foreclosures and getting the properties back on the market.

Seriously, if I saw my friend(s) and/or acquaintances(s) doing this, I would definitely take a long hard look at the personal financial strategy.