A strategic default is becoming a more common practice today among homeowners who owe more than their home is worth. They simply elect to give the property back to the lender.
It may not be a wise course to pursue. The American Bankers Association has warned of dire consequences. These include the attachment of personal assets, including autos, stocks, bonds, cash, etc.
Deliberately walking away from a mortgage may prevent your obtaining a subsequent mortgage for between 4 and 7 years. Government mortgages typically take 4 years to qualify. Fannie Mae recently said that one would be ineligible for 7 years if they intentionally defaulted on a mortgage.
Regardless of whether it follows a strategic default or other circumstances, a foreclosure has a negative impact on a consumer's credit score. Craig Watts, public affairs director of FICO says, "A foreclosure is one of the stronger predictors of future credit risk." Foreclosures remain on a credit report for seven years, with the impact gradually diminishing over time. Watts says, "For someone who has a foreclosure on (his or) her credit report, (his or) her FICO score can generally begin to recover after a couple of years, assuming the consumer stays current with (his or) her payments on all (his or) her other credit accounts," The impact of a foreclosure on a credit score depends upon other factors in the borrower's credit history. The ABA says a foreclosure drops a FICO score by 100 to 400 points.
The Mortgage Forgiveness Debt Relief Act of 2007 (extended through 2012) protects many homeowners who have gone through a foreclosure. State taxes may still apply, so significant tax consequences may result.
Lenders can also seek a deficiency judgment against a borrower who defaults on a mortgage. Foreclosure or strategic default does not protect against this. Some states prevent a lender from obtaining a deficiency judgment, but others allow it. Eleven states currently are considered "non-recourse" states, where the property itself is the only collateral that can be recovered following a default. Florida does permit deficiency judgments.
Short sales often provide a far better solution for the distressed homeowner. This is particularly true for higher priced properties, where lenders are more amenable to negotiations. They prefer to recover a portion of their money as quickly as possible rather than having to report a huge loss on their books.
Florida courts often award deficiency judgments for the amount not satisfied of the original loan. Short Sale Commando's team always request a release from lenders during short sale negotiations. The release prohibits the lender from going to court later and asking for a deficiency judgment. This protects the homeowner.
It may not be a wise course to pursue. The American Bankers Association has warned of dire consequences. These include the attachment of personal assets, including autos, stocks, bonds, cash, etc.
Deliberately walking away from a mortgage may prevent your obtaining a subsequent mortgage for between 4 and 7 years. Government mortgages typically take 4 years to qualify. Fannie Mae recently said that one would be ineligible for 7 years if they intentionally defaulted on a mortgage.
Regardless of whether it follows a strategic default or other circumstances, a foreclosure has a negative impact on a consumer's credit score. Craig Watts, public affairs director of FICO says, "A foreclosure is one of the stronger predictors of future credit risk." Foreclosures remain on a credit report for seven years, with the impact gradually diminishing over time. Watts says, "For someone who has a foreclosure on (his or) her credit report, (his or) her FICO score can generally begin to recover after a couple of years, assuming the consumer stays current with (his or) her payments on all (his or) her other credit accounts," The impact of a foreclosure on a credit score depends upon other factors in the borrower's credit history. The ABA says a foreclosure drops a FICO score by 100 to 400 points.
The Mortgage Forgiveness Debt Relief Act of 2007 (extended through 2012) protects many homeowners who have gone through a foreclosure. State taxes may still apply, so significant tax consequences may result.
Lenders can also seek a deficiency judgment against a borrower who defaults on a mortgage. Foreclosure or strategic default does not protect against this. Some states prevent a lender from obtaining a deficiency judgment, but others allow it. Eleven states currently are considered "non-recourse" states, where the property itself is the only collateral that can be recovered following a default. Florida does permit deficiency judgments.
Short sales often provide a far better solution for the distressed homeowner. This is particularly true for higher priced properties, where lenders are more amenable to negotiations. They prefer to recover a portion of their money as quickly as possible rather than having to report a huge loss on their books.
Florida courts often award deficiency judgments for the amount not satisfied of the original loan. Short Sale Commando's team always request a release from lenders during short sale negotiations. The release prohibits the lender from going to court later and asking for a deficiency judgment. This protects the homeowner.
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