Strategic Default - Why Walking Away Is Not The Answer

By
Real Estate Agent with REALTY ONE GROUP SOUTHWEST CAL BRE #01856708

Huntington Beach Pier

Recently, there have been reports claiming that a "strategic default" can be an appropriate and even beneficial reaction to an upside-down mortgage or impending foreclosure.  While this idea has spread rapidly, the truth is that a default is never an easy road to choose, and rarely is it ever strategic.  In fact, defaulting on your mortgage can be incredibly dangerous and irresponsible when handling the financial future of you and your family.  Unfortunately, the ramifications of a "strategic default" are rarely---if ever---explained, leaving many homeowners stranded on an island of misinformation.

If this is your situation, first understand that you are not alone.  Millions of homeowners nationwide are in similar circumstances.  The only difference between them and you is that you're looking for answers...and this is a great start!

So what's the difference between a regular default and one this is 'strategic'?

Default occurs when a homeowner falls behind on mortgage payments.  This can be due to a hardship, which can include (but is limited to) job loss, divorce, medical bills, or a monthly income shortfall.  Due to current economic conditions, literally millions of homeowners across the country have found themselves in default situations.  For homeowners in default, programs have been initiated through the administration and lending institutions to provide solutions and to salvage financial futures.

Footsteps In The SandIn a "strategic default," the homeowner simply chooses to "walk away" from the mortgage---in other words, move out and stop paying---even though they may be able to make the payments.  This is often done when the homeowner owes more on the home than it's worth, and views the home as a bad investment.  However, most of these homeowners do not understand that walking away from the mortgage will expose them to foreclosure, credit issues, current and future employment challenges, and possible debt collections.

If you're underwater on your mortgage or behind on payments, you need to know that there is time to analyze your options before foreclosure happens. More importantly, there are alternatives that will protect your credit and financial well-being.  Educate yourself about "Strategic Default - Why Walking Away Is Not The Answer."

Mortgage lenders are looking to avoid the foreclosure process just as much as homeowners.  While they are not in the real estate business, some have instituted further options to help homeowners avoid foreclosure.

The U.S. Treasury recently announced new incentives, time lines and procedures for short sales.  The HAFA Program, part of the Home Affordable Modification Program (HAMP), simplifies short sales procedures by setting limits on the time it takes lenders to respond, freeing borrowers from debt and capping claims of subordinate lien holders.

My name is Dori Kay, and as a CDPE-designated agent, I have the most current information on this program and participating lenders. Let me assist you in organizing all the necessary paperwork to ensure you have everything you need to make an informed decision on your future. "Strategic Default" is not the answer. CDPE Logo

Visit my website and learn more about "Strategic Default - Why Walking Away Is Not The Answer" or contact me directly at (714) 309-1589.  

 

Posted by

 Dori Kay, REALTOR®

Prudential California Realty

 CA DRE Salesperson License  #01856708    Office License #01208606

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Comments (4)

Jeffrey Smith
Author of 'Realtors Guide To Short Sale Success - Eustis, FL
Short Sale Education

Great post Dori... if only we could reach these sellers before they make that decision to NOT shortsale. Some think the lender won't have access to information about them if they just "sneak away" in the middle of the night and move into their new home bought by them or bought by a relative for them to live in.

Mar 14, 2010 07:59 AM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

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.

Jul 07, 2010 11:16 AM
Rebecca Gaujot, Realtor®
Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Dori, I wholeheartedly agree with Tony and Suzanne above. DITTO DITTO

Feb 28, 2011 08:12 AM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Dori, this is such a controversial topic - we have not recommended that anyone do this, but there are many agents who endorse this action.

Sharon

 

Nov 04, 2012 09:25 PM