Predicting Strategic Defaults

"Strategic default" is the label we're giving to homeowners who make a deliberate choice to stop paying their (often underwater) mortgages even though they have still have at least some capacity to do so.  FICO is claiming that it has new, more accurate tools to predict which homeowners will strategically default.  Their press release is here--the full report requires registration.  Here's the short of it:

FICO Labs researchers have found that, as a group, strategic defaulters tend to be more savvy managers of their credit than the general population, with higher FICO Scores, lower revolving balances, fewer instances of exceeding limits on their credit cards and lower retail credit card usage.  This indicates that strategic defaulters display a different type of credit behavior than distressed consumers who miss payments.

They conclude that, based on these criteria, "[t]he riskiest borrowers were found to be 110 times more likely to commit a strategic default than the least risky borrowers."  That final point is astonishing; I'm amazed that a bunch of criteria that general could lead to such precise results.  If true though, that's really impressive.  I guess the point of all this is to enable banks to preemptively negotiate with those likely to commit strategic defaults.