How Strategic Default Works

How Strategic Default works and what it means are often discussed but rarely understood so let’s make it easy. Strategic Default is a foreclosure alternative where you stop making mortgage payments that you can otherwise afford as part of an overall plan to avoid foreclosure and improve your finances through reduced or eliminated payments.  Read About All of Your Foreclosure Options

There are two options to start the Strategic Default process –  contacting the bank from the start to let them know what you’re planning and why or waiting for the bank to figure it out on their own. Of course if you decide to contact the lender from the start don’t tell them that you’re formally declaring Strategic Default just focus on your financial problems and the remedy you’re hoping for.

Full Discussion of Strategic Default to Stop Foreclosure

There are advantages to each of your timing options with the hope under option one that working with the lender from the start  leads them to actually help you or at least not pursue a Deficiency Judgment. Not exactly Christmas morning. With option two, the benefit of delaying contact with the bank translates to time and money as the longer the Foreclosure Process continues the more money you’ll save on housing costs.

Regardless of when you actually speak with the bank, DON’T BE INTIMIDATED and don’t let anyone question the morality of your decision. Banks have no moral standing whatsoever to question your ethics or integrity because you’re making a decision that’s in your best financial interest, which is what banks do every day. The difference is that your banks’ never ending quest for short term profits has severely damaged the US economy while you’re just trying to keep a roof over your head.  Read About the Nationwide Foreclosure Settlement and Why the Banks Won Big Again.

Because Strategic Default is not a stand alone remedy, use the specific methods outlined in  SaveTheCave.com  on Foreclosure Loan Modification , Short Sales and Deed In Lieu of Foreclosure to compile whats needed to convince your lender to give you what you want. Using letters from our Sample Documents, put together a professional looking package including evidence that your mortgage is underwater and by how much and be sure to send the materials to the actual owner of your loan rather than the loan servicing company who may have no real interest in helping you. Is Your Mortgage Underwater?

If you’re asking for a Foreclosure Loan Modification by having your principal reduced to fair market value, make sure the bank knows that you’re much more likely to make affordable future payments and that eventually your investment will pay off for both sides.  In addition to avoiding the time and expense of foreclosing on your house, the housing market improves overall meaning banks make more loans and we can all get back to enjoying life and family rather than just trying to survive.  Don’t Let Foreclosure Stress Control Your Life

If you want permission for a Short Sale without the risk of a deficiency judgment, let the bank know that your credit score has already taken a hit and you have nothing to lose. Tell them in clear and unambiguous language that if they don’t agree to a short sale, they’ll face a long and expensive Foreclosure Lawsuit with nothing to gain but adding more property to an already bloated real estate portfolio. Banks only want to make money and don’t like holding excess property with ongoing maintenance, tax and insurance costs so use this knowledge to your advantage.

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Short Sale Sample Hardship Letter

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Your Second Mortgage in Foreclosure

What happens to your Second Mortgage in foreclosure is a rarely discussed topic but an important one nonetheless, especially for your post-foreclosure plans. Although many homeowners have second mortgages, which include lines of credit and home equity loans, very few understand the important distinction between the first and second mortgage.

By just looking at the actual documents there is very little difference between the first and second mortgage. Each consists of a “promissory note”, which includes the actual terms of the loan, and a “security agreement” which is called a mortgage or deed of trust and protects the bank by allowing them to sell your property to recover its losses.  Learn More About the Difference Between A Promissory Note and Mortgage.

The primary difference between the first and second mortgage is the priority of who gets paid first. Assuming that your primary mortgage was properly recorded by the bank, that loan will always be paid first and in full before the second mortgage can collect a dime.

Since the second mortgage actually uses your property to secure repayment just like your first mortgage, if your primary lender doesn’t get paid in full the second lender loses the right to collect on the property. Although the loan doesn’t go away, the second mortgage loses its “secured” status and becomes “unsecured” and much less likely to be repaid.  See How SaveTheCave Can Help You Stop Foreclosure and Avoid Foreclosure Sales.

What to do About Your Second Mortgage

Ignore is too of a strong word, but for now your focus should be squarely on your primary loan as it controls if and when a foreclosure lawsuit is filed. Since many homeowners have underwater mortgages, the likelihood of the second mortgage getting paid through a short sale or foreclosure is nearly nonexistent. Therefore what happens to your second mortgage in foreclosure is of secondary concern for now.

Once the property is sold, the second mortgage literally disappears unless your home sells for more than the first mortgage. Although the mortgage goes away, the promissory note remains in place.

Banks can then try to collect on promissory notes without the benefit of a mortgage, but most such efforts would be futile when people can’t even pay their first mortgages. Futile, but not impossible because when there’s money around greedy players can’t be far behind.

What will likely happen once the foreclosure crisis settles down is that banks and collection companies will try collecting unsecured second mortgages and deficiency judgments remaining after foreclosure. While many of these claims could be settled for pennies on the dollar, if collection efforts become too aggressive it may be time to meet with an experienced bankruptcy attorney in your area to help reduce or eliminate the remaining unsecured debts.

However, one step at a time as the future will take care of itself so deal with the present and the issues directly in front of you which is developing your foreclosure plans to avoid foreclosure by dealing with your primary mortgage.

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Avoiding Deficiency Judgments

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Florida Foreclosure Crisis

Love the weather but hate the housing market – a familiar refrain for many Floridians as the Florida Foreclosure Crisis has dominated the lives of  homeowners for the past several years.

Florida leads the nation in just about every negative foreclosure category and currently has more than 350,000 active foreclosure cases swamping the courts with a lot more to follow.  Unfortunately the number of foreclosure lawsuits is likely to double and the Florida Foreclosure Crisis worsen by 2014 due to 500,000 seriously delinquent mortgages that are not yet in foreclosure proceedings. Defending Florida Foreclosure Lawsuits.   Incredibly the current number of Florida loans in some stage of the foreclosure process – about 460,000 loans – is more than the total number of mortgages in 22 other states!  Florida Foreclosure Process

Finally, at least one in every four Florida home sale involves a property in foreclosure which means dramatically lower home values exceeding 50% in many counties with no signs of stabilizing anytime soon.  In fact well known housing analyst Jack McCabe, one of the few to predict the housing bust years before it happened, warns that it may take a decade or more for home prices to return to previous highs.

Broward County Foreclosure Help

Palm Beach County Foreclosure Help

Despite the negative outlook overall there’s a few reasons for short term optimism.  One positive sign is that many lenders are increasingly dealing with defaults through Short Sales rather than foreclosure lawsuits in a trend that will hopefully expand.  Recently major lenders Wells Fargo and Chase have actually been offering homeowners thousands of dollars to encourage short sales as banks are finally figuring out that its in their best interests to stabilize the housing market and work with rather than against homeowners to do so.

A second positive development that may help Florida homeowners is an influx of roughly $8 billion dollars in cash for Loan Modifications and other benefits from the Nationwide Foreclosure Settlement.  Although $8 billion dollars barely puts a dent in the $110 billion dollars in underwater Florida mortgages, something is better than nothing and will ultimately lead to more deals with banks and a few less foreclosures.  Is Your Mortgage Underwater?

The combination of funding from the multi-state Settlement and the increased willingness of lenders to push short sales over foreclosures are good signs but won’t fix the long term problem with largely unregulated predatory banks continuing to exploit the financial system.  Blame the Banks – Foreclosure is Not Your Fault

You can read more about the Foreclosure Settlement and why it won’t help in our recent blog and as a result its more important than ever to learn about the Foreclosure Process to take advantage of favorable conditions when and if they happen to give your foreclosure plans the best chance to work for.

Ten Foreclosure Options to Beat the Bank

You can use our Sample Foreclosure Documents to assist in getting your Florida short sale or loan modification approved and we’ve also included Sample Florida Legal Documents to help you defend your own foreclosure lawsuit.  Tips to Get Your Short Sale Approved

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Difference Between the Promissory Note and Mortgage

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Stop Foreclosure Stress and Enjoy Life

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Use SavetheCave.com To Stop Foreclosures

How to use SavetheCave.com to stop foreclosures starts with learning everything you can about the Foreclosure Process.  Once you know what’s actually going on it’s much easier to pick a foreclosure option that works best for you and your family.  Detailed Information on Foreclosure Options

At SavetheCave.com we understand the power of knowledge and as a result have provided extensive materials on a wide range of foreclosure topics to help you survive the foreclosure process.  You’ll learn everything from what to expect and when to tips for living with foreclosure stress and understanding the risks to your physical health and mental well being. The Dangers of Foreclosure Stress

Using the navigation bar at the top of our site you can select a general topic and any of the sub-topics that interest you from the drop-down menu which directs you to a detailed discussion of that topic as well as related links and materials.

Once you’re comfortable with the foreclosure process the next step is deciding which foreclosure option works best for you and then learning how to actually do it.  SavetheCave.com is here to help with this critical stage as well and provides all the information and tools you’ll need to to learn about the Ten Ways to Stop Foreclosure in addition to Unlimited Free Access to all of our Sample Foreclosure Documents and Legal Forms.

  Sample Foreclosure Documents

Our Sample Foreclosure Documents include cover letters to the bank, examples of what to include in your financial hardship letter and sample legal forms to help you get started if you decide to defend your own foreclosure lawsuit. They’re all part of our free membership and commitment to provide you with everything needed to stop foreclosure if at all possible.  Unlike other foreclosure sites there are no costly subscription fees so you can return as often as you like.

Because life goes on during and after foreclosure as well as the importance of maintaining a positive outlook in life, we’ve dedicated a significant portion of our site to topics related to the Dangers of Foreclosure Stress and will continue to provide valuable medical and lifestyle updates to Prevent Foreclosure Stress From Controlling Your Life.

Finally, with our weekly interactive blog we’ll keep you updated on the latest foreclosure trends and news, important legal developments and more ways to Save Your Cave and protect you from foreclosure.  Feel free to comment on any of our posts and share your story with our readers as well as your own tips for surviving the foreclosure crisis.

If you like what you read, tell your friends and relatives about us and let us know what we can do better. Even if you don’t like something, let us know your thoughts and what we can do to improve our site.

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Florida Ground Zero in Foreclosure Crisis

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Strange But True Foreclosure Stories

The recent foreclosure crisis has resulted in numerous disclosures of illegal and unethical actions by banks, loan servicing companies and many lawyers representing these companies that would have been hard to believe years ago but now seems to be more the rule than the exception.  Read About the Recent Nationwide Foreclosure Settlement.

As a result of these practices Strange But True Foreclosure Stories continue to pop up.  In the most common example, how would you feel if your bank’s mistake resulted in the loss of your home and then a second bank  sues you after your lost your home??  In an all too common foreclosure story you’d think there was protection from the second foreclosure lawsuit but you may be wrong! Be sure to read our discussion on Who Owns Your Mortgage and Why Care.

In many other cases former owners have been sued more than 15 years after selling their homes and paying off the mortgage.  Elizabeth Bolinger, who currently lives in a retirement home in Port St. Lucie, Florida was shocked and traumatized when she was served with a foreclosure lawsuit for property she sold in 1996.  The bank’s only explanation was that mistakes were made by the law firm handling the case but no apology was forthcoming.  Defending Foreclosure Lawsuits.

In a similar case, Cathy Hammers was abruptly awakened on the Saturday night following Thanksgiving when she was served with a foreclosure lawsuit for a home she sold in 1994.  When Hammers tried to contact the law firm handling the case she was rudely told to hire a lawyer and then disconnected.

Don’t Let Foreclosure Stress Control Your Life

In yet another twist resulting from the broad scope of foreclosure mistakes, one home was sold twice in one week.  Real estate investor Marjorie Oster was driving by the home she had just purchased in a short sale when she saw someone cleaning the pool, a lawn service cutting the grass and a pest company setting up a tent for termites none of which she had asked for or authorized.  Turns out that the work was done by the “other new owner” who bought the property a week earlier.  Once again the bank blamed the law firm but did nothing to fix the problem.  Tips to Get Your Short Sale Approved.

Finally, in the most bizarre story to date, a homeowner who bought his home for cash and never had a mortgage on the property was sued in foreclosure for a mortgage that didn’t exist.  Jason Grodensky didn’t receive an explanation or an apology, but how could the bank ever explain or justify suing someone who wasn’t even in their records!?  Blame the Banks – Foreclosure is Not Your Fault.

All true, all strange and unfortunately much more to follow.  Stay tuned and we’ll have lots more stories for our blog followers.

Do You Have Your Own Foreclosure Horror Story? Share your story with our readers by offering your own post and you”ll probably find  that other homeowners have the same or similar experiences!

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