A segment of Early Show had CBS Moneywatch’ s Jill Schlesinger talking about strategic defaults; if you should do them, when you should do it and what are the costs of doing it. Here is a link to the segment “Strategic Foreclosure” .

She talks about using a simple calculation to determine if you should be considering walking away from you mortgage. She states that if you are 20% underwater on your mortgage it could be the best thing to do. Her example was a home valued at $200,000 with a mortgage of $240,000. In our area, where the median price is over $600,000 the amount owed above market value would more than $120,000.

Interstingly the time it takes for a property to regain the value owed using an assumed average of 3% appreciation is over 6 years. So if you are diligent in your payments on the interest owed and all properties appreciate over time you will be even again in 6 years or you can not service the debt and spend money putting your kids through school.

Obviously the downside is that you will not be allowed credit for seven years.

Also obviously anyone considering a strategic default should work with an attorney.

It seems that it would be better for all concerned to figure out a way for the 3 to 4 Million Americans who are making payments on loans that exceed the value of their homes to refinance the mortgage with debt reductions. Why do people need to go through the process of breaking a contract and suffer the full impact on future credit when the lender could retain 80% of a perfoming loan investment? Riddle me this . . .