Strategic Defaulting? Moral Dilemma?

We’re in a market now where it’s very common to hear people talk about walking away from their homes every day. It can be a sore subject for some of the people I run into.

First off, i don’t see the logic in how this is a “moral” question. Most of the people I talk to or run into tell me “BANKS” will try to scare them into staying and paying on their home or risk taking a hit on their credit score. Simple math, when you owe $350k on a property and it’s now worth $150k what is one to do?

We can only be so optimistic so far, down $200k and how many years before you’ll see the break even point again? Most have spoken to lawyers, Realtors, lenders and other avenues for advice and it usually just boils down to being a business decision. “If it don’t make dollars, it don’t make sense.”

Homeowners will typically first try to a loan modification, typically something along the lines of the bank dropping the % rate and lowering monthly payment. Well to me that sounds like a move typical landlords do to keep tenants from moving out. Lower the rent a little bit so they still get paid. “Some money is always better than NO money”

Is this working? From my point of view I haven’t seen it work, at the end of the modification period or trial period the bank will just deny the principal reduction. Well that doesn’t help my home owner maybe it stopped the bleeding for a few months but they’re still in a pickle. I’ve been searching for someone to tell me that they have had a successful loan modification, where the bank actually did a principal reduction like “they” claim they will be doing or did or whatever.

Meanwhile we have to remember if you lost your down payment, that’s what you risked. The lender assumed the risk as well, everyone loses. The trend i’m seeing is people can afford their home still, they just DON’T WANT TO! Again the math doesn’t really add up. Otherwise people are just delaying the inevitable.

All this babble and the home owner is still upside down. So then now home owners turn to short sales to unload their residence. Either take SOME MONEY aka MARKET VALUE via short sale and move on, or the bank can take back the property via foreclosure, put it back up on market as a REO. You guessed it, they’ll get MARKET VALUE for the home.

It’s a frustrating time for all, lots of money loss, and lots of money being made all at the same time. This market is going to be like this for awhile so prepare yourself accordingly.