Strategic Default


Many homeowners who purchased their homes in the mid 2000’s are faced with the sobering fact that the value of what is likely their biggest investment has declined significantly. Add to this the fact that many are struggling to make the mortgage payment due to the effects of the economic downturn and you get a set of circumstances that has led many to contemplate strategically defaulting on their mortgages. The thought pattern here is “Why struggle to make this payment when my equity has dissipated to zero and even if I continue to make payments I will not see any equity buildup for many years”  While the moral issue of defaulting on an agreement seems to be wrong, the business analysis of the situation for many is leading them to this alternative. That is , it would be bad business to continue to pay into a losing situation. Sure they understand that their credit will be affected by doing this. However, when weighed against the losses suffered based on the decline in market value, many are opting for this choice.  The stigma of foreclosure , although still there, is not as severe in the eyes of many in view of the number of homeowners faced with this problem. The number of foreclosures that are strategic defaults has increased over the past year for just this reason.

If you are faced with a similar situation, please do not hesitate to contact me at The Law Office of William J. Reinhardt, Jr. at 718-377-8880 or e=mail me at bill@billreinhardtlaw.com.


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