The Alternative To Strategic Default or Buy & Bail

The Homeowners Mortgage Relief Program

What you'll read in the following according to the Mortgage Bankers Association is how lenders and servicers are prepared for those who simply walk away from their mortgages (strategic default - voluntary foreclosure-buy and bail) and then we'll show you a simple alternative to strategic default. How to walk away the right way.

1.Definition & Drivers of Strategic Mortgage Defaults

A. Strategic Mortgage Default - But and Bail (aka Voluntary Foreclosure) is the conscious decision by a borrower to discontinue making payments on a mortgage debt, despite having the financial ability to do so.

B. Strategic Mortgage Defaults are a growing concern and have recently emerged as a new theme in the ongoing foreclosure crisis in the U.S. housing market

Associated with residential and commercial mortgages

Usually occurs after a substantial drop in the valuation of the property, such that the debt owed is considerably greater than the value of the property

The likelihood of strategic default increases with the severity of negative equity (geographic characteristics) and certain borrower credit characteristics

2. Geographic Characteristics

A. Strategic defaults are driven by a negative equity position and are increasing in occurrence - at low levels of negative equity, strategic defaults are a lesser occurrence but increase with higher severity of negative equity positions

B. Negative Equity is often referred to as “underwater” or “upside down,” which means that borrowers owe more on their mortgages than their properties are worth - negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both

3. Borrower Credit Characteristics

A. Higher credit scores and higher loan balances are typically associated with strategic default occurrence - jumbo prime collateral with high credit scores is the most exposed to potential strategic defaults and is also the collateral type that  benefits the least from loan modification & work-out efforts

B. The incidence of strategic defaults is significantly lower at the subprime end of the credit spectrum with lower credit scores and lower loan balances – this is the collateral type that has the potential to benefit the most from HAMP/HARP and FHA refinancing & foreclosure prevention initiatives 

5. Response and Initiatives

A. Since June 2010 one GSE announced policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure which includes a 1) Seven-Year “Lockout” policy barring future originations 2) Pursuit of deficiency judgments where allowable and 3) instructing servicers to monitor delinquent loans and put forth recommendations for cases that warrant borrower pursuit

B. Overall GSE message reiterates that broader social and policy interests are best served by discouraging strategic defaults

Best Practice Mitigation

A. Educate delinquent borrowers regarding alternative foreclosure options and the true cost of strategic default which may include 1) Loan Modification programs & workout options 2) Deed-in-lieu (DIL) of foreclosure & short-sale scenarios and 3)  Creating awareness of the credit impact, 7 year “lock-out” & the correlated neighborhood value deterioration effects

B. Borrower deficiency pursuit

Monitor delinquent loans facing foreclosure and put forth

recommendations for cases that warrant the pursuit of deficiency judgments, which may include pulling updated credit reports to determine if other debts are performing – you can also look across your lender channels to see if credit cards or auto loans are paid in a timely manner when the mortgage payment is not

C. Exclusionary List option - move borrower and/or strategic default companies to internal ban/exclusionary list to mitigate future origination risk across all lending channels

Even credit reporting agencies are working with the lenders and servicers to determine if you've simply walked away and how to "catch" you. 

See: http://www.experian.com/assets/decision-analytics/brochures/strategic-default-capabilities-brochure.pdf

Homeowners Relief Options Inc. has an alternative to strategic defaults-buy and bail (voluntary foreclosure) or economic default (involuntary foreclosure). It's simple and non complicated. 

We take over the mortgage payments and your lender or servicer see's continuity in mortgage payments thereby no red flags. We take over you move on. 

More info on the Alternative to Strategic Default or foreclosure: https://www.homeownersreliefoptions.com/strategic-default-buy-and-bail

See our Homeowners Mortgage Relief Program below: 

https://www.homeownersreliefoptions.com/Homeowners-relief-program

and more information on the benefits to you as well here: 

https://www.homeownersreliefoptions.com/program-benefits

Simple, easy and non complicated. We take over your mortgage payments & home and you move on.

To receive a Homeowners Fact Form to start the process and/or get more information with no obligation send us an email to: mailto:info@homeownersreliefprogram.com

By C Lenett

https://www.HomeownersReliefOptions.com/

mailto: info@homeownersreliefprogram.com

(623) 738-4398