What is a Strategic Mortgage Default?
We Represent Homeowners in ALL Florida counties. No office visit required.
A strategic default begins with a decision by a homeowner to walk away from their mortgage mortgage. When assisted by an experienced foreclosure attorney, a strategic mortgage default can be an effective solution.
The most common reason for a strategic default is that the value of the property has dropped below the amount owed on the mortgage. This is referred to as “negative equity” or being “underwater.” Faced with negative equity, many homeowners rationally conclude that they will be better off financially in the long run if they choose to walk away from their mortgage.
The decision to strategically default is often also influenced by other financial considerations including loss a job, reduction in income or the need to move to a different city or state. Owners of rental properties often consider a strategic default when it becomes difficult to rent the property or the rental income is no longer sufficient to generate a positive monthly cash flow.
Mortgage payments may also be draining other financial resources. Unemployed homeowners tap into their retirement plans to make mortgage payments. Savings accounts are wiped out as homeowners try to keep their heads above water.
It is estimated that over 1 million homeowners who could afford to pay their home loans will walk away from their mortgages this year alone. The term strategic default has become part of our common vocabulary and the concept has been the subject of television specials, newspaper articles, and academic study. In Arizona, more than 50% of all houses are underwater. In Nevada, it’s even worse: 65% of houses have negative equity.
Though most severe in Arizona, California, Florida, Michigan and Nevada, negative equity is a nationwide problem. Across the country, more than 16 million homeowners are now underwater. Many leading economists predict that the housing crash will continue to worsen, perhaps for many years, before it ever stabilizes. This is a crisis of unprecedented magnitude.
Once considered taboo, choosing to default on a debt has become increasingly more common and more acceptable, particularly as America consumers become increasingly aware that banks and lenders are not taking steps to help families and property owners keep their homes. Anyone who has attempted to apply for a mortgage modification or conduct a short sale knows how difficult it is to deal with most banks and loan servicers. More Americans are becoming angry that these banks have taken billions of dollars in taxpayer bailouts, and then have used that money to forcibly remove hundreds of thousands of Americans from their homes.
Many families have come to the realization that there will be no bailouts for the American homeowner struggling to make mortgage payments. No one is coming to save them. They feel abandoned by their banks and by their government. If you feel this way, you are not alone. And you are right. I have spent years defending American homeowners in a war being waged against them by banks and financial institutions. The courtrooms of America have become the battleground in this war. The American homeowner is losing.
But you have the means to fight back. You have the ability to unshackle yourself and walk away. The time has come to recognize that we no longer live in the America of our youth. The American dream, if it ever truly existed, has been forever changed. To survive in these new times, in this “new normal,” you must come to the realization that since no one is coming to help you, you must help yourself. You must take stock of your financial situation and your future. You must put yourself and your family first. You must decide what is in your best interest, and then let nothing stand in your way. Stop listening to banks and loan servicers trying to shame you into continuing to pay on a toxic mortgage. Stop looking to elected officials to offer you a way out.
You must seize control of your life and make decisions that are best for you. I will give you the information you need to make an informed decision about your financial future. The Forrest Law Firm can help you regain control of your financial future.
Top Three Reasons to Consider a Strategic Default
Reason No. 1: It Makes Financial Sense
The CEO of Citibank’s mortgage unit estimates that one in five homeowners who default on their mortgage are engaging in a strategic default. Your home is likely to be one of the biggest financial investments you will ever make. For millions of families, it has been the cornerstone of their financial security. But a home, even though you may have emotional attachments to it, is a financial investment. Real estate is an asset, just like stocks and bonds.If you owned a stock that was dropping in value, and many experts predicted that it would continue to drop in value into the foreseeable future, would you hold onto that stock? Or would you sell it? Most rational people would not think twice before selling that stock. Why should it be any different for a house?
Reason No. 2: It's Time to Put Yourself First
It’s been said so may times that it’s almost become a cliche: We living through the worst economic downturn since the Great Depression. Trillions of dollars of real estate wealth has vanished. Many leading economists believe that we are already in another depression, and few are predicting any recovery in the near future. In is entirely possible that the American economy will not recover its pre-crash levels in our lifetimes.
Millions of American families are facing crushing debts and income shock caused by layoffs and income reduction. New credit is hard to come by. Bankruptcies are at an all time high. It's time to put the needs of you and your family first.
Reason No. 3: You Have No Ethical or Moral Obligation to Your Lender
Do you feel guilty about considering a strategic default? Does it make you a bad person? An unethical person? Absolutely not. Voluntarily defaulting on a mortgage is not immoral. Ethics should not enter into your decision concerning whether or not to strategically default.
Law Professor Brent White of the University of Arizona puts it simply: Morality and emotions have no place in one’s decision to strategically default on a mortgage. Forget about shame and guilt, he says. Don’t worry about your credit score. If you owe more than your home is worth, stop paying your mortgage and walk away.
“Underwater homeowners aren’t knowingly making bad financial decisions, they just can’t cognitively grasp that they would be better off if they walked away from their mortgages,” he writes. “Most underwater homeowners don’t default as a result of two emotional forces: 1) the desire to avoid the shame or guilt associated with foreclosure; and 2) fear over the perceived consequences of foreclosure -- consequences that are much less severe than most homeowners have been led to believe.”
Lenders do not take ethics into account when they decide to loan money. It is a financial transaction. Both you and the bank took a risk. When the risk goes bad for the bank, they run to the government for a bailout. You don’t have that option.
Banks and borrowers do not operate on a level playing field. Lenders set the rules during the housing boom. They offered loans with no documentation, money down, no income verification, and inflated appraisals. They set up borrowers to fail with adjustable rate, interest only, and “pick-a-payment” loans. These toxic loans created a massive demand for housing and inflated the housing bubble. Now that housing values have tanked, these same banks are unwilling to reduce the principal on your loan, and make it nearly impossible to obtain a loan modification.
“Homeowners should be defaulting in droves,” says Professor White. The Forrest Law Firm's Strategic Default Plan® may be the solution you've been looking for.
Strategic Default: Protect Yourself, Your Family and Your Future.
Banks, loan servicers and the federal government do not want you to walk away from your mortgage. It is not in their best interest. They are not on your side.
Don’t believe me? Then believe Brent White, law professor at the University of Arizona. Professor White wrote a controversial academic paper concluding that banks and the federal government exploit your sense of shame and remorse to keep you from defaulting on your mortgage. He says more people should be defaulting on their home loans.
“You won’t find a time in history where this many Americans were underwater on their mortgage. You won’t find a time where this many people’s homes are worth half of what they paid for their homes. These are unique times, and things are different,” said Professor White.
Do you think banks feel remorse when they make financial decisions based solely on their financial interest? Think again. Lenders make decisions to walk away from bad financial situations all the time. Morgan Stanley walked away from five San Francisco office buildings they bought at the height of the real estate boom.
But the banks don’t want you to follow in their footsteps. They stand to lose huge amounts of money. So does the federal government. The U.S. government owns millions of mortgage through Fannie Mae and Freddie Mac, the government sponsored entities that buy up mortgages from loan originators. Fannie Mae and Freddie Mac have also received billions of dollar in taxpayer bailouts, and some experts predict that they may ultimately require up to $1 trillion in taxpayer assistance. The Federal Housing Administration insures millions more residential home loans. If you’ve ever wondered why the federal government doesn’t do more to help American homeowners, this may be the reason.
Fannie Mae announced in June 2010 that they will penalize borrowers who choose to strategically default. Defaulting borrowers who walk away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Fannie Mae will also pursue borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. Does this sound like a government that has your best interests at heart?
This new government policy targets those of us who are most vulnerable. Instead of handing out money to American homeowners like they did for big banks, the U.S. government now says they may sue you if they believe that you walked away from your Fannie Mae mortgage in a strategic default.
It has been estimated that it would cost about $745 billion to restore all underwater homeowners to positive equity. That’s only a little more than the first round of bailout money given to the big banks in the TARP program.
Are you getting angry yet? I’ll show you how to fight back.
Strategic Default Lawyer in Sarasota and Bradenton
Call The Forrest Law Firm today at 1-800-915-3923 for an informative and comprehensive consultation on how The Forrest Law Firm Strategic Default Plan® can help you.