Saturday, January 22, 2011

Strategic Defaults on Home Loans & Mortgages

strategic default 

Some homeowners are upside down on their homes during these challenging economy times and are "underwater" - where property values are less than the amount owed to lenders and lienholders. 

We don't support voluntary "strategic default" on home loans and mortgages.  However, it's a consideration for some homeowners here in Orange County, and we are prepared with information and discussion.

Walking away from your home loan or mortgage is considered a "strategic default" - when a homeowner can afford to make loan payments and voluntarily walks away from that obligation. voluntary walk away

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

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

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

voluntary default on home loanThose who "walk away" from home mortgage generally decide they can't afford to wait for the market to come back and recover their lost equity.

Others have plans to move for a job or are 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 a proposed short sale is negative, or proposed loan modification 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 net asset value.

Options to "walk away":

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

Impacts of voluntarily "walking away" from home mortgage:

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

Rethinking the voluntary "Walk Away"

  • Consequences of voluntary "walking away" or not
  • Does morality matter with this kind of decision?
  • Is walking away from a home loan morally or ethically wrong?
  • Can a "walk away" be for the greater good?

_____________________

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 home loan situation, 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.comwww.OCPropertyNews.comwww.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. 

Posted via email from Explore OC Homes

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