What is a strategic default? Is it legal?We are hearing more and more about strategic defaults so what is a strategic default on a mortgage? Is it legal? Currently there is no laws stopping them. So what is a strategic default on a mortgage? A strategic default is where a home owner intentionally lets the bank foreclose on their home for the purpose of
A strategic default is going into foreclosure on purpose. Those who participate in this choice are people who have the ability to pay their mortgage, have a stellar credit rating and abruptly choose to walk away from their home payment responsibility. They are choosing to go into foreclosure on purpose. Currently as of January 2010 they are saying about 25% of all foreclosures are strategic defaults. Is it legal.... yes at this time. Is it ethical? It is up to each person that is thinking about going into a strategic default. Some people don't think it is right to go into foreclosure on purpose that we as consumers are paying for it. So this is what a strategic default is? What do you think about it? Should homeowners be penalized for it? Russ Ravary your Metro Detroit real estate agent serving the Detroit suburbs and out lying areas.
Oakland County lake real estate and home listings http://www.detroitmichiganrealestatehomes.com/0051F4 Posted on Feb 26, 2010 @ 10:22 am by russ.ravary - View Profile
 russ.ravary  3 feedbacks »
Comment from: DG [Visitor] They are severly penalized alraedy in the form of a 300 point hit to the credit score. Not being able to get a loan with favorable terms for 7+ years is punishment enough.  Permalink Feb 26, 2010 @ 1:10 pmComment from: Matt [Visitor] Hi, Many large businesses are currently walking away from real estate contracts. What is so different about a company doing it & an individual doing it? None. If you no longer find any reason to stay in the relationship why stay? Why not end it? Is it a moral issue? I don't see how. Are taxpayers going to eat it either way? Yes. Will the company/person suffer a penalty to their future ability to borrow? I hope so... For you & any of your readers I would highly suggest 2 blogs I read daily to keep up on reality in this economic climate:
http://globaleconomicanalysis.blogspot.com/
http://market-ticker.denninger.net/
They are my favorite 2 minds concerning real estate & everything else money related. Best, Matt Permalink Feb 28, 2010 @ 8:43 pmComment from: Arong [Visitor] Strategic default is morally sound and perfectly fine. People should not be guilt tripped for strategically defaulting. Here are some reasons: 1) Existence and persistence of corporations and businesses using the same exact strategy every day. 2) It is not illegal. 3) Most importantly, contract theory. Contract Theory is the basis for all contractual obligations. In Contract Theory, the only binding elements of the contract are the collateral put up by each party "quid pro quo." In Contract Theory, all parties are always given the right to null or void a contract at any given time, risking only the forfeiture of what they put up as collateral. In a normal mortgage contract, the bank puts up a loan as their collateral while the buyer puts up their home as collateral. If the buyer nulls the agreements of a mortgage contract, then the collateral (the house) is forfeited to the bank. This is how contracts work, is business as usual, and implies NO morality in a contract. You will find no contract, mortgage or otherwise, that states "you are a bad and immoral person if you do not fulfill your end of the contract." And no mortgage contract can say "it is illegal for you to forfeit your end of the contract." ========= So what is the worst possible immorality of nulling a mortgage contract? Well, the worst possible would be "breaking a promise." Ever promised your child to take them to McDonald's and then not go? That is the same extent to which breaking a promise to pay in a mortgage contract goes in immorality. Permalink Dec 27, 2010 @ 12:17 pmComment on this article This post has no feedback awaiting moderation... |
