What is a strategic default? Is it legal?

What is a strategic default? Is it legal?



We are hearing more and more about strategic defaults so what is a strategic default on a mortgage?  Is it legal?  Currently there is no laws stopping them.

So what is a strategic default on a mortgage?    A strategic default is where a home owner intentionally lets the bank foreclose on their home for the purpose of

  • getting a lower house payment
  • getting out from under a mortgage
  • to move into a better school system
  • to buy a bigger house with the same payment
  • to move into a better neighborhood
  • to get back on the right financial path

strategic default is going into foreclosure on purpose. Those who participate in this choice are people who have the ability to pay their mortgage, have a stellar credit rating and abruptly choose to walk away from their home payment responsibility.  They are choosing to go into foreclosure on purpose.

Currently as of January 2010 they are saying about 25% of all foreclosures are strategic defaults.  Is it legal…. yes at this time.  Is it ethical?  It is up to each person that is thinking about going into a strategic default.  Some people don’t think it is right to go into foreclosure on purpose that we as consumers are paying for it.

So this is what a strategic default is?  What do you think about it?  Should homeowners be penalized for it?

Russ Ravary your Metro Detroit real estate agent serving the Detroit suburbs and out lying areas.

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