Considering Strategic Default? Consider This
There has been a long debate over Strategic Default over the last few years. Many discussions from both sides of the equation, some are for, some are against.
Back in November I wrote a post about Strategic Default. The post raised the moral question as to if Strategic Default was the way to get out from an underwater mortgage. Would the Strategic Default be 
the wave of the future? Would Strategic Default be the best decision financially for a family?
There have been numerous television shows debating the issue, the media has taken the term and made it a big topic of conversation. Walk Away From Your Mortgage! is an article in the New York Times that caused quite a bit of controversy. Google Strategic Default and get a blow by blow description on how to put the plan in action.
Businesses make decisions every day to walk away. It is in the best financial interest for them to do so. So why isn't it okay for me or you to walk away? Are you considering Strategic Default? Consider these things before you do.
Even if you currently have the ability to pay your mortgage payments, but are underwater, have you contacted your mortgage servicer to find out alternatives? Give them the opportunity to work with you prior to becoming delinquent and causing credit problems.
Until recently, there were many stories of people walking away with no repercussion. However, today banks are becoming smarter. Certain states allow for a deficiency judgment on the amount owed after a foreclosure sale. Banks will begin to pursue the deficiency judgment. That does allow for wage garnishment. If your home is underwater by a great deal, a deficiency judgment could bankrupt you.
Fannie Mae has recently announced a seven year lockout policy for those people who opt for Strategic Default. Not only will you be unable to buy a home for 7 years with a FNMA backed mortgage, Fannie Mae will also pursue legal action to recoup their losses. FNMAwill be working closely with loan servicers to monitor delinquent loans facing foreclosure for cases that warrant legal action.
Consider the impact it would have if every homeowner that was underwater decided to no longer pay their mortgage. Imagine what that would do to our neighborhoods, property values and our economy. It is too scary to even contemplate. Over the last few years it has become much more difficult to obtain a mortgage. With Strategic Defaults looming, lending institutions have the potential of folding due to unsustainable losses or in the least, the cost of obtaining a mortgage or other credit for that matter could increase substantially.
To make it more interesting, throw in the moral example being set in society. The signing of a promissory note; being a "promise to pay", means zero. Once upon a time a man was trusted on a handshake alone.......
Consider another option....a short sale. A short sale of your property is an agreement with your current mortgage holder to accept a payoff that is "short" of what is owed. You do not need to be delinquent on your mortgage for your lender to agree to a short payoff. Save your credit, sell your home without the stress of a foreclosure and move along! Want some additional information on short selling your home? I would love to discuss this option further with you.
Is it worth it? Are you Considering Strategic Default? Consider This, maybe your answer is different than mine.
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