In strategic default, a homeowner walks away from a mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. though they can make payments, prompting foreclosureForeclosure is the legal action taken to extinguish a home owner's right and interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. in a property, so that the property can be sold in a foreclosure sale to satisfy a debt..
Q: Recently in my local paperPaper is slang usage that refers to the mortgage, trust deed, installment, and land contract., I saw an article you wrote on strategic foreclosure. I now cannot locate it. Would you be kind enough to forward it to me?
Thanks so much.
A: We don’t have anything on ThinkGlink.com about strategic foreclosure, but we’re guessing that what you’re interested in is a concept known as “strategic default.”
We write about strategic default about once a month. The term strategic default refers to someone who can afford to make the payments on their property but chooses instead to turn the keys over to the lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. instead, thus defaulting on future payments.
When homeowners are severely underwater, defined as more than 25 percent, they are much more likely to choose strategic default, which makes lenders nervous about the current real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. environment in some areas of the country, where home prices continue to decline.
As home prices decline, more homes decline in value. That pushing home values underwater, that is less than the mortgage amount, thus increasing the chances of additional mortgage delinquencies and defaults, strategic or otherwise.
Here is a link to the stories we’ve recently written about strategic default: http://www.thinkglink.com/tag/strategic-default/. We hope this helps.