Myth: strategic default is limited higher-income debtors.
In our experience, clients across the income spectrum have considered and engaged in strategic default.
Myth: strategic default is limited to investment properties.
In our experience, clients have strategically defaulted on primary residences as well as investment/rental properties and commercial properties.
Myth: lenders are eager to avoid foreclosure — which is one consequence of strategic default — and will do almost anything to work with a borrower in order to avoid it.
In our experience, lenders are either unwilling or unable to modify mortgages to give borrowers the relief that they need in order to avoid strategic default. The government, and lenders themselves, are talking a big game about modification, but it is just not happening.
Myth: strategic default is immoral and unethical.
We firmly believe that the lender made a business decision to offer a mortgage, factoring in how to protect itself in the event of default (including down payment, interest, repossessing the property, etc.). Mark Gimein has debunked this myth more thoroughly and articulately than most.
Myth: a short sale is the best or only way out.
Not surprisingly, realtors are among the harshest critics of strategic default, perhaps because a short sale generates a realtor commission but strategic default does not. Short sales are fraught with problems for borrowers: they are time consuming, frustrating, and create a variety of legal and tax traps for the borrower/seller.
As the recession drags on and mis-information piles up on the web and in advertisements, it’s tough to get a clear view of how to legally handle financial difficulties. A qualified bankruptcy attorney may be the best source of unbiased information and may actually help you avoid bankruptcy or mortgage default. Get the facts for your circumstances.