Home > Foreclosure alternatives > “Strategic Defaults” on the Rise

“Strategic Defaults” on the Rise

A Northwestern University study shows homeowners are walking away from their homes in increasing numbers.

A recent development that has come along with the current decline in real estate values is the “strategic default.”

This is where a home owner is able to make their monthly mortgage payments, but chooses not to — usually because the value of their home has falled significantly below what they owe on their mortgage.

Researchers at the University of Chicago and Northwestern University found that the number of homeowners strategically defaulting is on the rise, according to an article on DSNews.com.

Now, we can debate the morality of strategic defaults until the cows come home, but that is not the purpose of this blog. This blog was founded with the mission of presenting financially distressed home owners with options to avoid foreclosure.

Toward that aim, there are two problems with strategic default:

1) Home owners who strategically default are not financially distressed.

and

2) Strategic default does not avoid foreclosure, but rather it all but guarantees it.

Now if you do not have a financial hardship and you can still make your mortgage payments, it is not likely you will qualify for a short sale, but that also is not a guarantee. If there is a reason you must sell your home, ie moving for a job relocation, you may be able to qualify for a short sale.

In short, if you choose to stop paying your mortgage, and you let the bank foreclose on your home, neither I nor any other short sale specialist can help you.

But if you are truly in a financial bind, before you just walk away, give me a call.

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