What is A Strategic Default

A strategic default is the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments. (Wikipedia)

But what are the repercussions from just walking away from a mortgage debt when in fact you can make the payments. There has had their income reduced, interest rates adjusted which makes it impossible to make the mortgage payments.

So should forgiveness be granted. Probably not, according to Fannie Mae who if they can prove it was a strategic default may not give new loans to strategic defaulters now or in the foreseeable future. In some states lenders have 5 years to get a deficiency judgment and up to 20 years to collect. According to a recent article, many lenders are going after mortgage defaulters by hiring collection firms or selling their judgments.

While there may be forgiveness for hardship cases, those who intentionally either walk away from their mortgage obligation or in some cases buy another home while their credit is still good and can afford 2 homes and then walk–could turn up to bite them sometime in the future.

We have all made bad investments (well I know that I have) and blaming the economy, market, etc. is really no excuse. Sometimes we just have to take the lumps and figure out how to make it right.

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