Monkey See, Monkey Do? Strategic Mortgage Defaults…
March 31st, 2010 categories: Foreclosures, Short Sales, Tips for Sellers, Worth Sharing
There is a World of Difference Between a Real Distress Situation and a Strategic Default.
I don’t mean to be disrespectful but I am always scared of “Trends” when they involve financial decisions. Strategic Mortgage Defaults reminds me too much the times when everyone was an investor expecting to flip a property for a huge profit.
How many people did their due diligence?
How many people could afford the worst case scenario?
How many people did it because “everyone is doing it”?
I understand that a Strategic Default can be a preventive measure expecting to protect other assets a homeowner may have. Let’s say the Mortgage, Taxes and Insurance on a Property add up to $ 2,500.00 a month and the same property can be rented for $ 1,600.00 this means reducing annual expenses by $ 10,800 a year that are probably being taken out from the homeowners savings account. The worst is the uncertainty of when the property will recoup the lost value.
My main concern is the downward spiral it creates. As more properties hit the Market as Short Sales or Foreclosures prices may tend to decrease.
In reality this is one of those situations that are a catch 22…there is no wrong or right answer. The most important thing is to make an informed decision understanding the many consequences it may bring and that probably the unpaid balance will not disappear and the credit score will end taking a hit.
Some related articles:
Fed-Up Homeowners who can pay their mortgage, Don’t - RISMEDIA
Strategic Defaults lessons fromthe great depression – THE NEW YORK TIMES
Walking away from your mortgage has consequences – USA TODAY
What might happen if you walk away from your mortgage – MONEY
