The foreclosure crisis that has swept the country has prompted many homeowners to actually stop paying the mortgage in what has been called “strategic default”.
Foreclosure, For Sale
When a homeowner files for foreclosure, they typically have close to a year before they’re actually kicked out, making strategic default an attractive option for the desperate. I.e., you can live in your home essentially payment-free, and maybe not even have to move if the foreclosure papers aren’t filed, or if you reach some sort of agreement with your bank. Of course there is the serious damage to your credit. On the upside, you are freeing up money for other necessities (or non-necessities as the case may be).
An interesting article on MSN Money discusses whether property owners have a moral obligation to pay their mortgage (which is a contract after all) or if it’s okay to just walk away. For those who find themselves underwater or facing potential foreclosure, the article offers a lot of interesting information on the pros and cons of letting your mortgage payments go.
The story claims the number of these so-called strategic defaults are on the rise, as banks find it difficult to pursue delinquents (in states where this is allowed) and as more and more homeowners see no other way out. According to the report, many who are struggling to hold onto their homes and/or are diligently make payments to the bank every month aren’t happy with those who choose to just walk away and stop paying the mortgage.
Interested in learning more? The MSN Money article can be found here:
http://realestate.msn.com/article.aspx?cp-documentid=23390500&page=0#atoolb
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