Financial experts believe that many homeowners may be considering a strategic default as they have incurred big loans, have little equity and are “upside down” on their mortgages. It appears they would rather walk away than wait for the real estate market to turn around in a decade or longer.
Fighting a foreclosure in Miami is one way to stop the banks from taking your home away. But many others are considering a strategic default in Miami as a way to fight back.
Strategic default means the homeowner simply mails the keys to the bank and walks away from the loan. Typically the reason for this is the mortgage is under water, meaning the homeowner owes more than what the house is worth. What has become a reality more recently for homeowners is that the real estate market in Miami won’t be turning around for years or decades.
However, considering one of these exit strategies does have consequences. And a deficiency judgment in Miami is one of them. As Miami foreclosure defense lawyers have seen, banks have become more aggressive when it comes to deficiency judgments.
That is when the bank comes after the borrower for the difference between what is owed on the mortgage and what the house is sold for at auction. Given how much prices have dropped, banks have gotten more and more aggressive in pursuing borrowers who walk away.
According to a Washington Post article, experts believe that those with jumbo mortgages may be the next in line to default, as banks are anticipating that happening. Those with big mortgages, good credit scores, but little equity fit the criteria.
Moody’s, the ratings agency, recently put out a study that found homeowners with jumbo mortgages are now at a “greater strategic default risk” than any other type of borrower. Because many are stuck with persistent negative equity, they are likely to walk away rather than be stuck in a market hit by real estate deflation.
FICO, the credit score agency, estimates that 30 percent of all defaults are strategic. Considering there are 12 million or more mortgages underwater, people simply stopping making payments even though they can afford them is a “growing problem.”
While people likely understand what’s going on in their local real estate market, the article opines that many may not know the consequences — including triple digit credit score hits, which can make getting another loan difficult for several years. But a deficiency judgment is typically the bigger issue at hand.
Especially in markets with larger fluctuation in prices in the last five years, of which Miami is at the top of the list, a deficiency judgment can be crippling. If a person took out a loan for $450,000 for a house that is now worth $250,000 and the family walked away and is now renting, how could they be expected to pay back $200,000?
That is something that requires legal counsel to help you understand the risks and prepare a strategy for fending off the banks when they start calling and sending threatening letters and e-mails. If you are considering strategic default in Miami, consult with an experienced foreclosure defense lawyer first.
If you’re battling foreclosure in Miami or the surrounding areas, contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991.
More Blog Entries:
Florida Clerk Sues MERS For Using Invalid and Inaccurate Filings in Miami Foreclosures: November 10, 2011
Financial Expert Loses His House and Tells How to Avoid Foreclosure in Miami: November 7, 2011
Jumbo mortgages may be next in line to default, by Kenneth R. Harney, The Washington Post