Strategic Foreclosure: Should You Consider It?
What is a Strategic Foreclosure?
Strategic foreclosure is a term that refers to the deliberate default on a mortgage by homeowners who walk away from their homes, rather than continue to pay on a home whose market value has dropped in value. Some homeowners who owe on an underwater mortgage (where the market value of the property is significantly less than the payoff amount) are tempted by strategic foreclosure, as it will allow them to walk away from the property and start again. Strategic foreclosure also means that homeowners do not face the beginning of formal foreclosure proceedings. If you are considering a strategic foreclosure, what should you bear in mind before you reach a decision? Should you take the initiative and opt out of continuing to pay your mortgage by going through with a strategic foreclosure?
How Strategic Foreclosure Impacts Your Credit Score
According to Highlands Today, a strategic foreclosure will have the same impact on their credit score as a loan modification, judicial foreclosure, short-sale or deed-in-lieu of foreclosure. In addition, homeowners who opt for strategic foreclosure risk being sued for any balance that is owed on the home. The immediate aftermath of a strategic foreclosure also means that your credit score will be damaged, even if you have diligently paid all your bills on time up until this time.
Other Options
Underwater homeowners who do not want to deal with the moral, legal or emotional implications of a strategic foreclosure, should explore their other options, such as speaking to their lender and discussing the option of a short-sale, loan modification, or Mr. Obama's Making Home Affordable scheme. Click here to learn more about this scheme.
Strategic foreclosure will not wipe out the problem of an underwater mortgage, as homeowners who walk away will have to live with the consequences of their actions for some years after they abandon their home. Consider your options, speak to your lender and try to work out a deal so that the lure of a strategic foreclosure does not entice you.
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Published by Sophie Spyrou
Sophie has been writing for the Yahoo! Contributor Network since 13th May 2007. She used her previous status as a Featured Contributor (Travel, then Pets) to share her personal knowledge about the UK culture... View profile
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2 Comments
Post a CommentGreat topic!
Good information. I hope it never comes to this for any of us.