You may have heard recently about Strategic Defaults, as this has been all over the news. A strategic default is when a homeowner chooses to walk away from their mortgage, even if they have the ability to pay.
The reason most homeowners choose a Strategic Default is because their home has dropped substantially below what they owe on their mortgage. Many homeowners believe it will take many years to recoup the value on their home, and are simply walking away.
Fannie Mae just announced that they are increasing penalties to buyers who just walk away. Fannie Mae wants to reinforce the importance to homeowners of working with their servicer. Walking away from a mortgage is bad for communities, and Fannie's goal is to deter this behavior by locking out borrowers who do this for 7 years! They will also go after borrowers personally in states where they are allowed to do so.
One reason for many homeowners frustrations is the difficulty in obtaining a loan modification. Homeowners may not qualify, afford the adjusted payments, or simply do not get an answer in months--even over a year! 7 out of 10 homeowners never consult a realtor during this process, and may not know if a short sale may be more beneficial to them.
Arizona Short Sale vs. Strategic Default
One alternative to foreclosure that I have had a lot of success with is short sales. A short sale is when a lender accepts less than the mortgage amount at closing. The homeowner benefits by getting out of the mortgage with much less damage to their credit than a foreclosure. In many cases homeowners who have completed short sales are eligible for a loan in 2-3 years, far less than the 7 years that Fannie Mae is imposing.
The mitigating factor between a short sale and a strategic default is whether or not the homeowner has a hardship. A hardship can be caused from a decrease or loss in income, medical/health issues, increased credit/debt, adjustable rate mortgage increase, increased living expenses, or lack of cash reserves. Most lenders will want to see some kind of hardship to consider a short sale, if not they still may agree to a short sale but might require the seller to participate in the loss. In some cases I have handled they have asked for no-interest promissory notes, or cash at closing.
There are certainly a number of different issues to think about when deciding if a short sale is the right option. For a free report on alternatives to foreclosure, as well as the latest programs and incentives, please visit :
http://www.azforeclosurehelptoday.com/
If you are in need of a short sale on your home or condo in Scottsdale, Phoenix, Cave Creek, Fountain Hills, Carefree, Paradise Valley, Chandler, Gilbert, Mesa, Tempe, Glendale, Suprise, Peoria, Avondale, or Goodyear please contact me to discuss the process.
If you are outside Maricopa or Pinal County, Arizona I can help refer you to a local agent in your area that is experienced in short sales.