Despite the best efforts from the Obama Government, more and more homeowners are embracing the idea of foreclosure over paying their mortgage. This action of the homeowners is called strategic foreclosure, i.e. the homeowners are walking away from their mortgages even when they can afford to pay. Their logic for doing so is simple- it suits their best financial interest.

Strategic foreclosure is an emerging trend and with its emergence the number of mortgage foreclosures has almost doubled since the housing bubble has burst. Now, one out of every four foreclosed property is a strategic foreclosure.

The overall decline in the property value has been determined as the main cause behind this consumer behavior. For many homeowners, the values of their homes have plummeted since the time of purchase, resulting in negative equity. But they'd still have to repay the entire mortgage amount. Given the situation, many are finding solution in foreclosing the property.

For example: a three bedroom house which would have cost around $500, 000 back in 2006 may fetch only $200k if you sell it now. Homeowners are finding it hard to continue paying the mortgage when there is no visible gain for them. By foreclosing the property the borrower can instantly save $300k along with a reduction in his monthly mortgage installment.

Foreclosure would ruin your credit report and you may get denied for another mortgage in the future because of it. But in spite of these negative aspects, more and more homeowners are deliberately falling behind their mortgage payments, allowing the lenders to foreclose on their homes.

According to the experts, neighbors can also influence the decision of foreclosing since it's easier to bear the shame when there are many foreclosures in the neighborhood.

Whatever be the reason, the impact of foreclosures would be far reaching in the economy. Experts fear this trend to continue even in the coming days. If this continues unabated then the economy would soon fall into the spiral of declining home values. Major changes in the lending policies can only save the economy from a complete breakdown.