Boca Raton Strategic Default Lawyer
Sometimes a home is so far underwater, meaning the amount owed on it is far greater than what the property is worth, that the homeowner chooses to stop making payments on it. This is referred to as strategic default and differs from a typical foreclosure in that the homeowner can still afford to make the payments but simply chooses not to.
Typically, most property owners who opt for a strategic default only do so after weighing the risks with the benefits of walking away. However, even if it makes good business sense to go through with a strategic default, there are real and lasting consequences of walking away. A Boca Raton strategic default lawyer can help you see the downside of walking away and examine alternative solutions that do not come with as many negative repercussions.
Downsides to Defaulting
Just because you CHOOSE to default on your loan does not mean that you are immune to the same consequences that come with defaulting involuntarily. If you do walk away from your loan, you face the following ramifications:
- Deficiency Judgement: Just because you choose to stop paying your mortgage does not mean you are free of liability. The bank can and likely will hold you accountable for the remainder of what is owed after the foreclosure sale.
- Damage to Your Credit Score:Strategically defaulting is still defaulting, and your credit score will be hurt because of it. If your goal is to acquire new property shortly after walking away, you may want to consider a different route.
- Problems Obtaining Future Housing:If you do not plan to buy but plan to rent, bear in mind that you still may face some issues. It is standard procedure for landlords to review potentially lessees’ credit scores and select the more “trustworthy” candidate.
- Difficulty Obtaining New Loans:Fannie Mae has specifically stated that it will not lend to strategic defaulters for at least seven years from the date of foreclosure. Moreover, it has stated that it will take legal action to recoup any outstanding debt from borrowers who strategically defaulted on their home loans and who live in jurisdictions that allow for it.
In addition to the direct consequences of walking away from an underwater home, you may face indirect consequences. For instance, you may find yourself morally conflicted after you make the decision, or a friend or family may view you differently for walking away. In more extreme circumstances, an employer may decide not to hire you based on your decision, rationalizing that your moral character must be unsound.
Alternatives to Strategic Default
If you are upside down on a home, there are other methods you can pursue to free yourself of the home’s debt. An experienced lawyer can help you review those options and pursue the one that is right for you. Some of those options include:
- Deeds in Lieu of Foreclosure: In this situation, the lender agrees to take possession of the deed to the property instead of foreclosing. While this seems like an even trade, bear in mind that the lender can still pursue a deficiency judgement against you.
- Short Sale:You can always sell your home for less than what you owe on it. If you do so, it is imperative that you obtain the lender’s permission and work with a knowledgeable lawyer who can draft the requisite legal documents. Without certain legal protections in place, you may still be at risk for a deficiency judgement.
- Loan Modification:If you plan to walk away because you cannot afford the loan as opposed to you simply think the property is a bad investment, talk to your lender about modifying the loan to make it more affordable.
Consult With a Legal Professional Before Making Any Definitive Decisions
Strategic default is almost never a good idea. If you are underwater on your home or property, you do have other, better options. Reach out to the Boca Raton strategic default lawyers at Nowack & Olson, PLLC, to discuss your legal options today.