Strategic Default, Right or Wrong?

Reblogger
Services for Real Estate Pros with Marketing with Kate

This is one of those hot topics and this blog has been re-blogged several times.  I'm re-blogging this for a different reason - to challenge the "statistic".  I don't buy it.  I talk to as many as 10 to 20 people a day who are suffering from financial hardship.  I can count on one hand the number of people who are "strategically" defaulting.  Most are searching for solutions.  The banks have told people that they have "strategically default" in order to get loan modifications, then they deny the loan modification and foreclose.  This is pure financial sector, marketing BS!  JMHO!

Original content by Nona Swann BR# 637555

 

 

Today I was reading a financial paper from my local mortgage lender and he attached a story about that 31% of the defaults are strategic. It is not that these homeowners can not make their mortgage payments but choose not to because of lost value.

The research showed that the strategic defaulters had not put much money into the home as far as downpayment and had no attachment to the "American Dream" of homeownership.

The homeowners also hear about all the big banks paying huge bonuses and taking bailout money being acceptable. When one bonus to an executive could pay off many loans or bring hundreds current.

They decision to drop the under water home versus waiting for 10 or more years to gain the lost equity is a financial decision not an emotional one. They would rather take the 3 to 7 years hit on their credit versus holding on to a property that will take so many years to gain any equity.

It gave me something to think about. How do you make the decision to choose between no strategic default but make mortgage payments for years essentially throwing the money away. Doing the right thing because your signature on the mortgage note is important to you.

Is this issue clearly black or white? 

As real estate agents we know until the defaults slow down we will continue in a declining market.

If the strategic defaults continue to grow how will this effect our real estate market? Will this continue to allow the prices to decline. Will this declining market continue for more years because of strategic defaults?

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Nona Swann                                                         

Swann & Associates Real Estate, Inc

Serving Central and South Brevard County            

321-541-1218 office 

BrevardBestHomes.com        

 

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I am Kate Bourland. I help people like you get out of debt. Debt Settlement, Mortgage Acceleration, and practical suggestions for eliminating debt. Call for a Free Debt Evaluation.



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Comments (5)

Tni LeBlanc, Realtor®, J.D.
Mint Properties, Lic. #01871795 - Santa Maria, CA
Tenacious Tni (805) 878-9879

Yes I think the word "strategic" is the wrong or a poor choice of words.  I meet with people who are paying 70% of their take home pay toward their mortgage.  Are thye being strategic?  I think they are being strategic the same way people are before they declare bankruptcy.  It is a financial decision you make when you realize you are in over your head.

Nov 02, 2010 08:17 PM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Kate - I've been reading about strategic defaults too, but don't know anyone who has walked away simply because they didn't want to pay. I've talked to many more who tried to pay and couldn't - or who got sucked into the idea of a loan modification only to be turned down after many, many months of game-playing with the banks.

Considering your stance on the subject, I think you'd be interested in this article I read today: http://www.bloomberg.com/news/2010-11-02/mortgage-modifications-meant-to-save-u-s-homes-push-them-into-foreclosure.html

Nov 02, 2010 08:21 PM
Dan Edward Phillips
Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA
Humboldt and Del Norte Counties, CA

Good Morning Kate, great post on defaults, I missed it, thank you for putting it back up.

Nov 02, 2010 11:35 PM
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Kate, I agree with your challenge 100%.

The lender's definition of a strategic default needs to be examined before their statistics are accepted as fact. Many homeowners can afford their mortgage but must relocate for family or job reasons. Once they move they cannot sell their underwater house and they cannot afford two mortgage payments.

Nov 03, 2010 05:17 AM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Tni - I think that tactical would be a better use of terms

Marte - thanks for sharing that article, it was worth the read.

Dan - you're welcome

Dave, the whole thing makes no sense.  Thanks for commenting.

Nov 04, 2010 01:50 PM

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