The housing market problem is not actually only confined to borrowers having trouble with their mortgage payments. There is also a growing number of homeowners who are finding themselves with a home whose property has declined at a level which left them with more debt than home equity.
Since 2006, the amount of home equity lost in Florida has reached $113 billion. In addition, home prices have declined by almost 55 percent while 43 percent of South Florida homeowners are said to be underwater.
It is therefore not surprising why more and more homeowners are choosing a strategic default. Basically, these borrowers have lost all hope they will ever recover the equity they lost and are allowing banks to foreclosure. Before, such a mortgage default was thought to be unthinkable but considering its growing popularity, it is starting to become the norm in some areas.
A Mortgage Bankers Association report releases last week revealed that 25 percent of the nations’ foreclosures are in Florida. And of the total Florida foreclosures, 25 percent is said to be under the strategic default category. In the past years, walk always have increased 50x which clearly shows how homeowners are responding to their situation.
It takes an average of 25 months for a bank to complete the foreclosure process and during these months, the homeowner tries to save up money, instead of working with their lender, so they will be prepared once they are evicted.
If you are thinking about doing a strategic default, you should know that it does not come without any consequences. For starters, your credit score will be adversely affected and you will surely find it hard to take out a loan next time you are in the market to buy a home. In addition, lenders in Florida have the right to pursue deficiency judgment after you defaulted.
A short sale is considered to be the middle road between the strategic default and actually paying your mortgage debt. In 2010, 20 percent of the total existing homes sales involved short sale transactions. Aside from the fact it is kinder to your credit; lenders may not pursue a deficiency judgment leaving you with zero mortgage debt.
Comments(1)