Nationwide, homeowners have found themselves in a home that they owe more on the mortgage than the current market value of the property, and are not sure how long it's going to take to actually see equity in their property again, at least not in the near future.
Because of this, many economists are now concerned about something called "Strategic Defaults," which is basically homeowners that feel that it doesn't make financial sense to keep their home anymore and are now considering a short sale or just letting it go into foreclosure. Lenders are now seeing a lot of cases where the homeowners are choosing to be late on their mortgage, even though they can afford the mortgage.
Strategic defaults are fueled by the declining value of homes, as homeowners feel like they are throwing good money after bad, so lenders need to come up with programs to combat this, which should include some principle reductions or incentives for on time payments or we will see a very slow recovery in the housing market. Florida is one of the states that are experiencing a high level of strategic defaults as its one of the states that has seen the largest decline in home values.
The Obama Administration understands that as the economy gets worst more and more homeowners will decide to walk away and that will hinder the recovery of the real estate market, so they have invested over $75 billion to encourage lenders to work more diligently with homeowners nationwide to encourage them to stay in their homes by means of a loan modifications and short sales instead of walking away. Homeowners have to also realize that if they choose to walk away from their home, they are going to see some negative impacts to their credit report, as they will have late payments and now a foreclosure in the public record section of their credit report. Which can result in 100 - 200 point drop in your credit score, as this will disqualify you for a new mortgage for a few years, as well as you can see your credit card interest rates go up and insurance premiums will also increase just to name a few, being late on your mortgage and having a foreclosure on your credit causes a ripple effect in your finances.
Nationwide nearly 600,000 borrowers walked away from their home in 2008, which was double the amount when compared to 2007. Since foreclosures are taking longer than normal in today's market, borrowers that do decide to stop making payments will ride it out for months and in some cases at least a year or more until they are evicted by the lender. Borrowers need to consider all the ramifications of this option, as its not only detrimental to your credit which can affect you for years to come, but also your lender can sue you for any past due amounts, as well as get a deficiency judgment against you, for the difference of what the house is sold for once the home is sold back on the market and the amount you owed.
So if you decide you no longer want the home, its best to continue making the payments and go through a short sale process, which you will get the banks cooperation to sell the property for less than you owe. And if you want to keep it, then definitely consider a Loan Modification.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in Florida FHA Mortgage Loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Florida Loss Mitigation. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit specializedfinancialsolutions.com/lendersexposed.htm
or Call 954-678-5796
Article Source: Marlon Baugh
