Strategic Default, simply makes financial sense
Strategic Default, simply makes financial sense
For more than two years, home foreclosures have swept Florida, spreading misery among families, as lenders continue to undermine the efforts to restart the economy.
The bigger problem may turn out to be the Floridians who are still faithfully paying their mortgages, on houses worth far less than before the proverbial bubble burst.
How could that be a source of future trouble? Home prices in most of Florida continue to decline, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending - a drag on family finances, the
housing market and the overall economy. And the drag could persist for years.
An estimated 424,000 Florida homeowners are underwater a staggering 50 percent. Many of these homeowners are paying much higher interest rates than the latest national average of 4.25 percent. They still have jobs and can afford to make the payments.
But they can't refinance because they owe too much and selling the home at a huge loss is out of the question. These underwater borrowers can't even take advantage of the Treasury
Department's loan modification program, which generally requires a job loss or another kind of hardship. In other words, they're stuck
Unless borrowers fall behind on their mortgage payments or face a high risk of defaulting, there's little chance that lenders, even with federal incentives, would reduce their principal or lower their interest rates. In other words, if you stop payments, you have a much better chance of getting a modification.
Most feel hopeless. What are they supposed to do? The likelihood that they will ever see positive equity in their homes isn't good - at least for the next decade or so.
Economists suggest that a lack of options will push more underwater borrowers to walk away from their mortgages. But in the meantime, the stress on families, the housing market and the whole economy will continue.
Theoretically, these homeowners could walk away - stop making the mortgage payments that consume a huge part of their income. But defaulting would ruin their credit and have other negative consequences, so most continue paying.
They're struggling to pay a mortgage on a home that is a fraction of its former value. Of course you can still make the payments, but why would you? You're now paying for a home that's probably worth 50% of what you originally paid for it.
The reality is that in Florida, prices have struggled to find a bottom. The median price of a single-family home in Florida was $133,400 in September, a 48% decline from its June
2006 peak, according to data from the Florida Assn. of Realtors. Condominium prices have seen an even bigger plunge, with the statewide median hitting $83,400 in September, a 61% drop from its June 2006 peak.
So what's their most viable option?
A Strategic Default; Look we all need to realize that the likelihood of our market recovering to the degree necessary to get out from under is simply not realistic. With the country on the verge of another great depression, many economists are predicting that a recovery may not occur for decades. Families are facing crushing debt and obtaining new credit is virtually impossible. It is crucial that you put the needs of your loved ones first, and walking away from a toxic mortgage situation can be the best option.
It simply makes financial sense. Real estate is an asset, just like stocks and bonds.
If you owned a stock that was dropping in value, and many experts predicted that it would continue to drop in value into the foreseeable future, would you hold onto that stock? Would you buy more? Or would you sell it? Most rational people would not think twice before selling that stock. Why should it be any different for a house?
For example, a homeowner who bought an average home in Miami at the peak would have paid around $355,400.00. That home is now worth around $190,000.00 and assuming a 5% down payment the homeowner would have approximately $140,000.00 in negative equity. The homeowner could save approximately $124,000.00 by strategically defaulting and renting a comparable home. Or, he/she could stay and take 20 years to recover the lost equity - all while throwing away $1,300.00 a month in net savings that he/she could save or invest elsewhere. Hundreds of thousands Florida homeowners could save hundreds of thousands of dollars by strategically defaulting on their mortgages.
However, if you are considering a strategic default it is very important to be represented by an experienced attorney during the strategic default process. An experienced attorney can help you navigate the pitfalls and emerge from a strategic default with as little, if any, financial damage as possible. You wouldn't try to set your own broken arm -- don't try to navigate a strategic default on your own. Professional guidance doesn't cost as much as you think.
The Advantage of Retaining the Carman Law Firm
When you work with us, you will be working with a team who believes in bringing you all the information and skills we can. We consider it our duty to help you analyze your situation, and we will provide you with every detail to ensure you make the most informed decision. We
can also assist you with settling your credit card debt for pennies on the dollar and provide active credit repair, helping your credit score rise as quickly as possible after a short sale or
strategic default.
The Carman Law Firm can assist those in need of debt and mortgage relief. With many options available and trusted answers to questions that someone might have about regarding credit card debt, short sales, loan modification, foreclosure and strategic default.
Begin protecting your family's best interests today;Call the Carman Law Firm at 1-800-763-0775 for an informative and free comprehensive consultation on how the Carman Law
Firm can help you.
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