Many Florida homeowners are underwater on their mortgage, meaning they owe more than the home is worth. Rather than sending mortgage payments in month after month on a home that is worth far less than what is owed, some are making a choice to voluntarily stop making payments on their homes. Dubbed a “strategic default,” deciding not to pay your mortgage even when you can might be something to seriously consider.
We can gladly walk through the likely pros and cons of not paying your mortgage to help you decide if this is the right route for you. We do not believe a lawyers job is to tell clients what to do. So, we will never tell you not to pay your mortgage. Rather, as lawyers, we will counsel you and give you sound legal advice of the consequences of paying versus not paying. From there, you, as the client, decide what is best for you.
Contact the Law Offices of Evan M. Rosen to learn more about strategic default and about loan resolution options for a home that is underwater. Our foreclosure defense attorneys are committed to treating you like we would want to be treated and to treating your case as if it was our own. We will listen to you as you explain the situation and your goals, and will then discuss various options that may be available to you to best resolve the challenges you are facing.
You are welcome to read more about strategic default below or you can contact us now for a consultation by calling 855-55-ROSEN or by filling out our online form.
A strategic default means that you simply stop making payments on your mortgage — even if you have the money to make them. You may continue to live in your home or rent your investment property after making this choice and while waiting for the bank to foreclose. You may also decide to leave the property and send in your keys to your mortgage lender — a practice so common that it now has been dubbed “jingle mail.” Finally, you may wish to negotiate alternatives to foreclosure that still allow you to give up your home, such as a deed-in-lieu of foreclosure.
Weighing the Pros and Cons
A strategic default is not for everyone, and there are some consequences to making this choice. You should thoroughly understand the risks and rewards before making a final decision. For example, consider:
- Whether you want to keep the property. If you hope to keep your property, then options such as a loan modification are a better choice.
- How great is the discrepancy between your home loan and the value of your home. The larger the gap between the home’s value and the mortgage amount, the more sense a strategic default might make.
- Whether you have significant assets that could be put at risk . Florida is a recourse state, which means a lender could obtain a deficiency judgment against you. A deficiency judgment is a court judgment for the difference between the balance owed/judgment amount and the amount the lender recovers when selling your home in a foreclosure sale. While you may be able to avoid a deficiency judgment in a strategic default by exploring loan resolution options with the Law Offices of Evan M. Rosen, it is important to realize that a deficiency judgment is a risk of default.
- Whether you are willing to withstand the damage to your credit. Late payments and a mortgage default are going to do damage to your credit score. This can make it difficult to buy a new home, get a car loan or obtain other types of credit. However, your credit score can recover, and it is even possible to obtain a home loan in as little as two to three years after a foreclosure, so this may or may not be a deciding factor.
These are the key things to think about when making the choice as to whether a strategic default is right for you. We like to remind clients to focus on the facts of the decision — not the emotions behind it.
In the business world, corporations understand that it is important to look at the bottom line and to make a choice regarding whether fulfillment of a contract makes sense. When it doesn’t, businesses regularly opt to breach a contract because it is more economically efficient and because doing so is necessary to keep the business profitable.
Most homeowners do not look at their mortgage relationship with an eye on the bottom line or even view it as a business transaction. Instead, many understandably feel a moral obligation to repay the mortgage loan. But, this may lead to making unwise choice. Perhaps it helps to consider what a bank would do if the deal you made turned out to be unfair to them.
By making the choice to keep making payments on a home that is worth less than what is owed, homeowners can make it very difficult for themselves to build wealth or get financially ahead. But on the other hand, if you stop paying, a foreclosure will almost certainly be filed. You could lose your home, seriously damage your credit and face a money judgment for the deficiency which could remain valid for up to 20 years. Deciding to default is not a decision you should take lightly and it is one that the lawyers at the Law Offices of Evan M. Rosen can help counsel you through.
When you purchased your home and obtained a mortgage loan, you did it on the basis of an appraisal, who was typically hired by a lender or mortgage broker. Your lender then reviewed your credit and other information, assessed the value of the home and made the decision to lend to you on the basis of that information. Oftentimes borrowers relied on their mortgage brokers or lenders to give them input as to how much of a monthly payment they could actually afford. Yet, borrowers who continue to pay on mortgages that are upside down are the ones who bear the full cost of the losses. This is simply unfair.
As a borrower, you did not cause the housing market to collapse. This happened largely because banks acted like sophisticated con-artists. First, they gave out money to people who they knew, or should have known, could not afford to repay. The bankers referred to certain loans as “liar loans,” because they intentionally lent out money to individuals based solely on their “stated income” without any independent verification. Why would a bank knowingly lend out money to those they considered to be “liars”? Ultimately, most of the loans, along with various kinds of artificially created side bets, known as derivatives, were bundled into trust or investments. Before stocks or bonds from these trusts could be sold off by Wall Street, the banks paid off rating agencies to rate these investments as AAA, when behind the scenes they were calling them “sacks of cr_ _” and placing “insurance” bets against them so they could collect even more money when these securities failed. These banks sold their toxic investments to everyone and anyone, local governments, foreign governments, individuals, and pension funds of our citizens, retirees, veterans, and more all while they were still lending out money to anyone with a pulse. It was very similar to giant Ponzi scheme in that rates of return to investors on old loans were being partially paid based on income that was being produced by funding new loans. Eventually, like all Ponzi schemes do, the house of cards collapsed. In the end, as most of the Wall Street insiders knew they would, these “securities” failed. The big banks made billions selling them and billions more when they defaulted, collecting on their “insurance” bets. To add insult to injury, when the companies that backed these devious “insurance” side wagers couldn’t pay off the Wall Street gamblers, the U.S. taxpayers and Main Street stepped in to bail them out. The big banks got bailed out and we all remember when their executives then took in more money in bonuses and compensation after the bailout then they did in any year during the heyday. The greed and arrogance is simply disgusting!
Why should you have to pay the price for Wall Street’s corruption by paying on a home that has declined significantly in value while the bank continues to make money hand over fist? You shouldn’t. Even if you can afford to pay, it’s in your best interest to at least consider whether strategic default is the right choice for you.
If you owe more than your house is worth, whether you are struggling to make mortgage payments or not, you should make a financially smart choice. Speak to an attorney at the Law Offices of Evan M. Rosen. With our commitment to put the needs of our clients first, we will take the time to review your situation in detail and to advise you on how best to proceed in dealing with your mortgage loan. Contact us today at 855-55-ROSEN or through our online form to schedule a consultation to learn more.
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