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Top 5 Answers for Homeowners about Strategic Mortgage Default

1. Should I intentionally default on my home mortgage?

Today, many people are ‘intentionally’ or ‘strategically’ defaulting because cash is more valuable than credit. Because many of the banks were unethical, some borrowers don’t feel the ‘moral obligation’ to pay, especially when the banks are being less than cooperative as buyers try to work things out. Rather than defaulting, the best thing to do is use the Section 702 program of the Obama act, which allows a qualified third-party buyer to take possession and make a ‘bona fide’ offer to the bank. This helps show the debt ‘settled’ on your credit and can eliminate the second mortgages completely. Walking away and allowing the bank to foreclose still allows the second lender to render a judgment—and possibly garnish your wages. You may also have to file for bankruptcy to recover from the credit nightmare.

In addition, it is always best to ...Read more...

2. As a borrower, what are some ways I can gain leverage with my mortgage holder?

One way to gain leverage with a lender is to establish a ‘substitute mortgage’—a security pledge that is offered to the seller’s lender, with a third party (lawyer or Escrow company) for a lesser amount of the current payment. Over time, this will result in...Read more...

3. Why have loan modifications and foreclosures become the predominant answer for so many in distressed property situations, and why can this be problematic?

The reason why loan modifications and foreclosures have become the answer for so many is because many real estate professionals erroneously consider the short sale process to be too complex. Not knowing how to orchestrate the transaction and not having the correct forms and contact information with all the different parties is overwhelming for many Realtors, so they forego an option that would otherwise be in the owner’s best interest. The result is unnecessary... Read more...

4. Why is a short sale strategy more advantageous than a loan modification or foreclosure approach?

The reduced payoff in a short sale can release you from the debt obligation. This allows you to re-establish your credit faster and re-enter the market much wiser. A loan modification actually builds... Read more...

If you find out you need more work to fix your credit, consult with a credit repair specialist to discuss your options and find out what is right for you.

5. I’ve heard borrowers in default need a ‘General Public Disclosure?’ Why

Many people are not aware of the ‘alternatives’ when facing foreclosure. The state and the federal agencies do not provide any literature to default borrowers as a ‘preventative’ measure. Knowing your options, as detailed on a General Public Disclosure document, can make all the difference in establishing a deal that’s in the homeowners’ best interest.

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