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.
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.
Photo by Danilo Rizzuti