Love the Dunes - Naples, Florida - Love the Dunes - Naples, Florida: Strategic Default has been discussed widely on the News

Strategic Default has been discussed widely on the news, and there are arguments on either side of the question. The term is applied when a property owner decides to stop making payments on a mortgage simply because the value of the property is now less than the mortgage balance. It is very much a product of the years of 100% mortgages, as even in the most stable of neighborhoods, values have fallen significantly since 2006.

The decision to do a strategic default is not the result of hardship. It is considered, by those who choose to pursue this course to be a business decision. They simply stop making payments, and redeploy those funds to other purposes as they live rent free until the lender completes the foreclosure process.

This term is never used in hardship cases, where an owner can no longer make his payments, perhaps due to loss of employment or other family hardship.

A strategic default is not with serious risks and needs to be considered carefully, with input from an attorney and tax advisor. Many in the legal profession are actually encouraging this approach, so it is important to deal with attorney who understands all the implications for the owners total financial outlook and avoid those who are profiting from this approach.

Foreclosure has a definite negative impact on credit scores and the ability to qualify for a future mortgage. That is not, however, the greatest concern. As the number of such defaults increase, lenders are now selling off the discharged debt to debt collection firms, and others are going after additional assets through deficiency judgments. In Florida, lenders have that right for five years and up to 20 years to collect. Additionally, there are tax implications to be considered.

As a reminder, three of the four members of LoveTheDunes team are certified short sales experts, and if you want to consider selling your property for less that the mortgage amount, we have the experience and tools assist you.

Below are recent articles that may be helpful if this topic is of interest to you.

Orlando Sentinel, Mortgage Default
Nuwire Investor, Strategic Defaults
Highland Today, Strategic Defaults
RWB Press, Short Sales Under Water

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