Reasons to Consider a Strategic Default

Every day, more Florida homeowners are choosing strategic default as their most viable option. With the country on the verge of another great depression, many economists are predicting that a recovery to pre-crash may not be occur for decades. Families are facing crushing debt loads, obtaining new credit is virtually impossible, and bankruptcy levels are at an all-time high. It is crucial that people put the needs of their loved ones first, and walking away from a toxic mortgage situation can be the best option.

Top 3 Reasons to Consider a Strategic Mortgage 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: You need to put yourself and your family 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. 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. Its time to put yourself and your family first.

Reason No. 3: You have no ethical 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.

It is very important to be represented by an experienced attorney during the strategic default process. An experienced attorney can help you navigate the pitfalls and emerge from a strategic default with as little financial damage as possible. You wouldn’t try to set your own broken arm -- don’t try to navigate a strategic default on your own with professional guidance. It doesn’t cost as much as you think.

Strategic Default Lawyer in Sarasota and Manatee Counties

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.