Perhaps It’s Time To Re-think “Strategic Default”

If this trend becomes the norm with both residential and commercial, it could create real estate chaos.

I posted on that 52 page paper by the AZ professor about this. Unfortunately if banks don't start getting more responsible in their dealings with loan mods and short sales, I fear we are in for a heavy round or people - including just plain folks, doing exactly this. Hope I'm wrong.

John,

Well, if businesses can do this, a strategic default, what prevents homeowners from doing it. Things may get mighty interesting next year.

John,  I will not be surprised a bit to see lenders working harder, in 2010, to assist buyer's with underwater mortgages.

John,

Well, isn't that just dandy? You can put lipstick on a pig...

John,

In Canada, we really don't have non-recourse loans either for individuals or corporations.

So, this strategy in large measure doesn't work.

Brian

Hmmmm . . . I'm sure you're right, but there's something that still doesn't "feel" quite right about that strategy.

One of four famous upscale hotels here, the W, went into foreclosure, but not because the owner couldn't afford it. The owner has something like 260 other properties throughout the world. Unfortunately, this one was purchased a couple of years ago and is now valued at just 50% of what it was bought for. It's hard to believe they were losing money on it to the extent that they were willing to just walk away.

John moves like this make us nervous.  You wonder what message this is sending out!

We need to not buy into the Bank's newspeak for describing their customers in a negative light for doing what the banks themselves are only too good at doing.

The "strategy" of most homebuyers is to buy the American dream...at a price supported by the American economy.  Then when the bankers screw up that economy (with policy "help" from Washington beforehand and monetary help from the same place afterward) those buyers review their situation...strategically.

When the bankers realize they've screwed up the economy, they ask Washington for money, they up the rates on credit card holders by the millions (including those have not paid late), they lobby their Dodd's in Congress to NOT pass or delay a law preventing those increases and they lobby the FED to allow interest rates to increase this spring so that their ARMs that are due to reset this summer in huge numbers can screw even more homeowners.

Homeowners thinking strategically?  When you are dealing with thugs and thieves, a little strategic thinking is a good idea.

Strategic Default is an acronym for cowardice.  If one is an ostrich - then stick your head in the sand.  If you are a responsible individual - do a Short Sale - unless your legal and tax advisors tell you to do otherwise.