Andrew W. Conner, CMPS ®, CRMS ® 

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Strategic Default On Mortgages 


What is the latest in the foreclosure crisis nationally? Strategic defaults are on the rise. More and more foreclosures are being considered strategic, meaning the homeowners have the financial ability to pay their mortgage payments, but have decided whether on their own or advised by their financial advisor it would be best to just walk away from their property. Many homeowners are facing this decision because they may owe more on their home than it is currently worth. If you are thinking of this strategy, carefully consider the consequences in this decision. Fannie Mae recently announced that they would pursue all homeowners fully if they believe the homeowner’s have the ability to pay the mortgage but decided to default anyway. If the state will allow a deficiency judgment, Fannie Mae plans to pursue homeowners who have strategically defaulted for all costs associated with getting the home back on the market.   Including but not limited to repair costs, replacement costs of any large appliances that may be missing, court costs, attorney fees as well as the remaining mortgage balance if the foreclosure sales results in a shortage to cover the original mortgage balance. Will you ever get another mortgage in the future after a strategic default? Fannie Mae’s current ruling is 7 years. When in reality you may never get a mortgage again if you have decided to strategically default with the deficiency judgment and other damage to your credit.

If you have thought about or even been advised to consider a “Strategic Default”, please seek the advise of someone that can point out the negative ramification of this decision. If you end up having to rent for the next 7 years, how much is that going to cost you? At $900 per month, you will pay $75,600 during that 7 year time frame. Monies that your landlord will be using to pay off their mortgage and gaining equity in their home. If you had stayed in your home and put that $75,600 on your mortgage and gained that equity of your own home, where would you be financially. While the $900 a month is relatively low especially in many areas of the country, consider in your current market place what the average rents are going to be and how much it will cost you over the long term. Your credit, your home, and your family will all be affected by the decision you make. Be sure you have all the facts and have explored all options in making the right financial decision concerning your mortgage. Make sure to base all your financial decision on your local housing and economic market, national trends do not always apply to your local area.  


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