What are YOUR thoughts on “Strategic Foreclosure?”
The number of prime mortgages facing foreclosure has shot up 425 percent since 2008 due to falling home values and rising unemployment. And if you purchased your home at the peak of the real estate market from 2004 to 2006, your value has substantially dropped. While these numbers may be irrelevant to some borrowers, those who are able to afford their mortgage payment and plan on residing in their home for a decade or more, others have simply given up in the hope of forcing a short-sale or principal reduction.The real questions is, should you walk away from your mortgage even if you can afford the payment? Millions of Americans are asking themselves that same question. Some borrowers feel they have a legal, moral, and ethical obligation to make payments notwithstanding a substantial drop in value. But with 17.4 million U.S. residential homes under water, a growing number of individuals are contemplating walking away from the place they call home.
If you can resolve yourself to possible litigation and a lower credit score for several years, walking away may be a smart business decision. Although strategic foreclosure is hot topic, only small percentage of borrowers are actually contemplating this technique at present. A recent study, however, found that approximately 32 percent of homeowners nationwide would consider walking away from their mortgage if the value of their home continues to decrease.
Why aren’t more distressed homeowners taking this route? While “strategic foreclosure” makes economic sense, many homeowners do not choose this course of action out of shame, guilt and fear. Underwater homeowners continue to stress over their mortgage payments to avoid the consequence of foreclosure and a perceived negative social stigma within the community. This is especially so when a borrower has the financial ability to pay. What do you think? Is strategic foreclosure an immoral copout or savvy financial move? Why?
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