Strategic Defaults

Protect Your Home from Mortgage Foreclosure with Strategic Default
Strategic default is always a legal option for homeowners who are facing mortgage foreclosure. When you are facing financial difficulties, strategic default can provide you with a way out of a tight financial situation and the ability to hold onto your home for additional months. Strategic default involves consciously choosing to stop making payments on a home before the foreseeable foreclosure of a home. After consulting with a lawyer, homeowners may decide that strategic default is in their best interest.

Homeowners may decide to pursue the route of strategic default if they are in the position of owing more money on a home than it is worth. Strategic default may also be an option if an individual does not have the cash flow necessary to cover utilities, property taxes, association fees or other expenses that are associated with a home.

Strategic default can be a favorable option for individuals who live in "non-recourse" states. Under the law, a non-recourse state is one in which lenders are unable to pursue a deficiency judgment against a homeowner for failing to pay his or her mortgage. There are currently twelve states that have non-recourse laws. These states are Florida, California, Arizona, Alaska, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Utah, Texas and Washington. The lender may still legally foreclose upon a property if a homeowner resides within a non-recourse state. However, a lender is required to take a loss on a home if it sells for an amount lower than its value.

Strategic default can also be used to extend the amount of time that a homeowner has to negotiate a loan modification with a lender. Through strategic default, the homeowner is given extra time to stay in a home as an attorney or other experienced professional negotiates with the lenders to lower the monthly payments that a person owes on a home. The ultimate goal of a strategic default is to be able to make payments affordable on the mortgage of a home or to reduce the principle balance on a loan. A principle balance may be drastically reduced through the process of strategic default.