As home prices decrease while unemployment and underemployment rise, foreclosures will also increase. In most cases, the homeowner simply can not afford to pay the mortgage anymore. However, there are some cases where the owner still can afford the payments, but chooses to walk away via a strategic default.
Strategic Mortgage Default
Most people do not plan for nor desire to have their home foreclosed. However, in a market where real estate values have dropped significantly, many homeowners find themselves in a situation of negative equity. This means they owe more on their mortgage balance than their home is currently worth, also known as being "underwater." The more underwater they are, the more tempted they may be to walk away from the mortgage by simply stopping the payments. This decision to allow a foreclosure by choice is known as a strategic mortgage default.
Deficiency Judgment
Being able to truly walk away from a mortgage is based on one major factor: the possibility of being sued for a deficiency judgment. Once the mortgage lender has sold the home in foreclosure, the proceeds of that sale are applied to the defaulted mortgage balance. If the proceeds are less than the mortgage balance, there is a deficiency. This is usually always the situation in an underwater home and market. A homeowner with a VA loan is always subject to such a deficiency judgment as per federal law, even if the state the property is in has anti-deficiency judgment laws.
Consequences
There are also other consequences to a strategic default besides the deficiency judgment issue. Any kind of default or foreclosure will harm the homeowners credit rating and history. Furthermore, if the strategic default is identified as such rather than a true hardship foreclosure, the negative credit impact can be even worse. This negative credit impact can cause difficulty in securing another home, even on a lease. The availability and cost of any future credit will be negatively affected. Also, future insurance premiums often increase because of this.
Other Considerations
The federal law of allowing a deficiency judgment for VA mortgages applies directly to the veteran borrower. However, there is also a legal possibility of the veteran's spouse or widow being held liable through a deficiency judgment. Such a deficiency judgment allows the lender to seize other property or money of the veteran borrower or spouse. One way the defaulting homeowner can preclude such a deficiency judgment is to file for bankruptcy protection. However, the negative credit consequences of this action can be even deeper and longer lasting.
How Does Co-Signing Affect My Credit? - Bills.com
www.bills.com Credit Credit Q&ARating: 4.5/5 21 reviewsEffects on Credit of Co-signing for a Loan How will co-signing on a loan affect my credit rating and my ability to get other loans for myself? Read full question
Strategic default - Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Strategic_defaultA strategic default is the decision by a borrower to stop making payments (i.e., to default) on a debt, despite having the financial ability to make the payments.
Strategic Default - Voluntary Foreclosure - Foreclosure Solutions ...
www.youwalkaway.com/strategic-defaultStrategic Default. Strategic default, also known as voluntary foreclosure, is when the borrower decides to stop paying a mortgage even though they can still afford ...
Beneficial Questions and Answers on the Basics of the VA Loan
www.vamortgagecenter.com/faqs_common.htmSee the most common VA Lending questions and how knowing the basics of the program can enhance your VA Loan benefit.
How Does Co-Signing A Loan Affect Your Credit?
www.askmrcreditcard.com/creditcardblog/how-does-co-signing-a-loan...Explanation of how co-signing affects your credit both positively and negatively and steps to take to prevent negative impact on your credit report.
You Walk Away - Foreclosure Help & Foreclosure Assistance
www.youwalkaway.comYou Walk Away assists homeowners in default or foreclosure by offering alternatives that are in the best interest of the homeowner including loan modification ...
From Mortgage Default to Right of Redemption - Foreclosure
www.mortgagenewsdaily.com/822005_Default_Mortgage.aspForeclosure is the last thing a homeowner thinks about when giving a mortgage. But it happens. We will discuss the process and some solutions to a desperate situation.
The Strategic Default Monitor
www.strategicdefault.orgStrategicDefault.org is the original online website providing free walk away and strategic default advice. The Strategic Default Monitor
How does a loan modification affect your credit? Find out if a ...
myloanmodificationcenter.com/blog/how-does-a-loan-modification...A loan modification is one of the best options to prevent foreclosure and keep your home-but how will the loan modification affect your credit?
I Inherited a House - Do I have to Refinance the Mortgage? :
www.ncestateplanningblog.com/2009/01/articles/real-property/i...No - in most cases. Mortgages generally contain "Due on Sale" clauses, which say that the lender can call the mortgage due upon transfer of
Default (finance) - Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Default_(finance)In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has ...
Calculate Monthly Home Loan Payments - How To Information - eHow
www.ehow.com Personal Finance Real EstateWhile making your mortgage payments on time can boost your credit score, your payment history must appear on your credit report to do you any good.
Homeowners Insurance and the Foreclosure Process - How Do
ezinearticles.com Real Estate ForeclosuresJul 15, 2008 Homeowners insurance is one of the peripheral issues that families facing foreclosure must deal with. While it is possible that the county can take the ...
Veterans Health Administration Home - U.S. Department of
www.va.gov/healthVA Medical Centers. The Veterans Health Administration is home to the United States largest integrated health care system consisting of 152 medical centers.
Welcome to the GI Bill Web Site The Home for All Educational ...
gibill.va.govThe Post 9/11 Gi Bill Apply For Benefits Education BenefitsContains information about VA education benefit programs, including the GI Bill, Tuition Assistance, Veterans Educational Assistance, and Dependents' Educational ...
Do Student Loans Affect a Mortgage Application?-Kiplinger
www.kiplinger.com/article/real-estate/T053-C002-S001-do-student...I'm in my early twenties and I'm thinking about buying a house. I don't have any credit-card debt, but I owe about $20,000 in student loans. Will that hurt my chances ...
Real Estate and Mortgage Glossary Terms and definitions A
www.realestateabc.com/glossary/glossary1.htmmortgage and real estate glossary from A to G ... GLOSSARY & DEFINITIONS A to G. acceleration clause A clause in your mortgage which allows the lender to demand ...
Pay.gov - Home
www.pay.govBy Agency Name By Form Name Agency List All Other FormsAttention VA Medical Care Copayment customers. If you do not know your username, or do not have one, you can still make a payment on our website.
Suze Orman Advice: Walking Away From Your Mortgage a Good
www.gobankingrates.com Mortgage Rates ForeclosureSuze Orman advises homeowners walk away from their mortgages when they're 20 percent or more underwater. But is strategic default really a good idea?
GMAC Mortgage Home Loans, Refinance, Mortgage Rates
www.gmacmortgage.comLog In Contact Us ContactA trusted national provider of mortgages, home loans, refinance, Jumbo, FHA, VA mortgage loans. Get mortgage rates for refinancing or buying a home.
Common Reasons A Home Will Fail The VA Home Loan Inspection
ezinearticles.com Real Estate HomesMar 19, 2011 Before guaranteeing a loan, the United States Department of Veterans Affairs (VA home loans division) wants to ensure that the home you wish to sell is a ...
Common Questions from First-time Homebuyers - HUD
www.hud.gov/buying/comq.cfmLoans Grants Buy a HUD Home HUD HomesDetailed answers for new home buyers seeking a first mortgage. Also features a library of PDF files for download.
4 dangers of walking away from your mortgage - MSN Real Estate
realestate.msn.com/article.aspx?cp-documentid=25923795Some homeowners who are "underwater," or owe more on their mortgage than the home's current value, are turning to "strategic defaults" in which they simply walk
Foreclosure Alternatives - U.S. Department of Veterans Affairs
www.vba.va.gov/ro/cleveland/foreclosure_alternatives.htmCleveland Regional Loan Center Avoiding Foreclosure . Click here for reference material regarding assistance with delinquent VA and non-VA mortgages.
Nice Information
BalasHapusCalifornia Home Purchased
Thanks For This Post And Please Visit this post for va loan requirement
BalasHapus