Yes. You heard right. Countless home owners for whatever reason (under water or upside down mortgage, loss of income, reduction of income, divorce, moving,) have elected to walk away from their mortgage and home, also known as voluntary foreclosure or strategic default. Don’t ask me why. It doesn’t make sense to me either. Perhaps they were or not aware of the many alternatives. Some of the alternatives are better than others depending on the mortgage situation. We’re making the case or argument here that is better to turn this situation that you cannot or are no longer willing to handle or assume to a willing party than to just walk away and let the chips fall where they may.
Okay. Lets look quickly at alternatives to walking away.
a) Short sale – offered as the alternative if you owe more on your mortgage than what the house is worth. The only thing is you still must get approval from your lender and less than 50 percent get approved. This process can take anywhere from 3 to 9 months if approved. If not approved you’ve wasted your time, the mortgage is now behind all those months of waiting and your credit rating has dropped significantly and you’ll be foreclosed on anyway. Okay lets say you did get approved for a short sale. Did you know that the credit scoring impact of a short sale compared to a foreclosure is just about the same? Yes it is. I’m not knocking realtors who just want or need more business but they should at least give these facts to homeowners when presenting the short sale alternative. Don’t believe me? Read about it here: http://massrealestatenews.com/credit-scoring-impacts-short-sale-vs-foreclosure/
b) Deed In Lieu – This is when the mortgage company or lender agrees to take back the property from you without going through formal foreclosure proceedings. You willingly sign deed over to them. But who benefits most in this scenario? The lender of course. It saves them time and money. Where is the benefit to the homeowner? A deed in lieu does not necessarily guarantee any release of personal liability or non negative reports by the lender to credit reporting agencies or even the lender suing for deficiency. Also the tax consequences of a deed in lieu is generally treated as a sale of property. If there is a second mortgage or other junior liens or claims on the property most lenders will not accept a deed in lieu because second mortgages and junior liens are not cancelled or extinguishable as in a foreclosure.
So…with that said perhaps allowing a third party (Mortgage Relief Solutions) take over the mortgage payments and the home owner moving on might not be a bad alternative after all. Again it is just another alternative to walking away that should or could be considered.
Mortgage Relief Solutions specialty is taking over mortgage payments from those who cannot or will not pay their mortgage any longer. Okay let me put it another way. A) Walk away -Foreclose – Bad credit – Deficiency judgement – 7 year lockout Or B) Turn over to Mortgage Relief Solutions the mortgage/house – Mortgage paid – Okay credit – Good Standing – Buy again
I mean you already know the given when you just walk away and foreclose voluntarily (strategic default). We are not advocating or recommending that. So when you turn it over to us (Mortgage Relief Solutions) can it get any worse? No. Only better and just plain walking away and foreclosing guarantees a certain outcome. Turning it over to a third party, namely Mortgage Relief Solutions increases the odds of the opposite.
Lenders are also proactive as well. Looking for “strategic defaulters” who can pay but choose not to and they will go after you. Read about it here: http://www.experian.com/assets/decision-analytics/brochures/strategic-default-capabilities-brochure.pdf
Also this alternative (let us take over the mortgage payments and home) is a good choice for those who simply cannot continue to pay their mortgage (economic defaulters) aka involuntary foreclosure. The Mortgage Relief Program. Check it out as an alternative to strategic default.
By Eric Brown