Strategic Defaults
Why Walking Away Is Not The Answer
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 report is a great start!
So what’s the difference between a regular default and one that is strategic?
Default occurs when a homeowner falls behind on mortgage payments. This can be due to a hardship, which can include (but isn’t 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.
In 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 your 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.
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.
So What’s Your Best Option?
First, you want to contact an agent who knows how to navigate these situations to learn more about your possible options. As a CDPE-trained agent, I can assist you in organizing all the necessary paperwork and ensure you have everything you need to make an informed decision about your future.
There are other, safer alternatives to foreclosure – including a short sale – than the harmful results of a “strategic default.”
Many homeowners today are facing uncertainty. They do not know what to do next for themselves and their families. Despite all attempts to hold on, foreclosure has become a reality that if not addressed or handled correctly can have a devastating outcome. Now more than ever, you need to prepare yourself to navigate the mistakes that are most commonly made.
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