Strategic Default

 Walking away from your home loan or mortgage is otherwise considered a “strategic default” – when a homeowner can afford to make loan payments and voluntarily walks away from that obligation.

True “walk-aways” have good payment histories with timely payments on home loans, their bills and credit accounts.

Homeowners who can no longer afford to pay their loans and bills would not be “strategic walkaways”.

What’s the motivation for someone walking away voluntarily from a home loan?

• Being upside down where value is less than loans and liens against the property.
• Being squeezed financially
• Being frustrated with no loan modification approved and/or decline of short sale by lienholders.

Those who “walk away” generally decide they can’t afford to wait for the market to come back and recover their lost equity.

Other people have plans for moving for a job or retiring, feel trapped, and are unable to accomplish goals unless they sell the property or walk away from debt.

When the lender’s reaction to proposed short sale is negative, or loan mod is denied, the more upside down the homeowner, the more likely they are to “walk away“ rather than continuing to make payments when there is no asset value.

Options to “walk away“:

• Staying put in the property and make payments
• Short sale
• Loan Modification
• Deed-in-lieu of foreclosure
• Bankrutpcy

Impacts of voluntarily “walking away” from home mortgage:

• Financial and tax
• Credit
• Morals and ethics
• Emotional and psychological

Rethinking the voluntary “Walk Away”

• Consequences of voluntary “walking away“ or not
• Does morality matter with this?
• Is it morally or ethically wrong?
• Can a “walk away” be for the greater good?

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Source: Tara-Nicolle Nelson – www.ReThinkRealEstate.com - This is for information only and not the providing of tax or legal services.  For decisions about your own situation on possible strategic default, you should consult with an attorney and/or income tax professional.

Harrison K. Long - solutions for real estate and business -  REALTOR and broker associate, Coldwell Banker Residential Brokerage - 949-854-7747 (phone) – ExploreProperties@gmail.com (email) - CA DRE 01410855 - www.OCHomeValueGuide.com – www.LiveAtOrangeCounty.com - www.CoastLivingHomes.com -  www.OCPropertyNews.com -  www.LiveAtNewportBeach.com  -  www.LiveAtIrvine.com  -  www.LiveAtLagunaBeach.com  – www.CostaMesaLive.com   -  www.NewportCoastLive.com - www.IrvineBestValues.com  

Please contact us with your questions about short sales and Orange County homes and properties.  Thanks and have a great day.