Strategic Default Monitor – How To Strategically Default
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Wednesday, March 12, 2014

Latest Foreclosure News 3-12-2014

Good News About Housing Recovery… Your Kids Will be Living With You for a Long Time 2-22-2014
Recently released surveys from both Gallup and Pew Research Center showed that as many as 36 percent of Americans 18 to 31 years old are still living with their parents… the highest level ever recorded. And Time Magazine says we’ve got 25 million adults kids still living with mom and dad... You’ve heard about the housing recovery, right? How could you not? On any given day these days, you can find the good news about housing markets in this country all over the media… prices are recovering, or so the story goes. The only problem with the “news” is that as of January 30th of this year, sales of existing U.S. homes plunged to the worst pace in 18 months. Read More at Mandelman Matters

Homeowner Alert: Scammer Masquerades as Bank, Offers Fake Loan Mods 2-22-2014
As if REAL loan modifications weren’t often illusory enough, now there are scammers masquerading as banks, offering FAKE LOAN MODIFICATIONS… and if that weren’t bad enough, the fake mods require homeowners to pay thousands of dollars for nothing. This past week, Illinois consumer attorney Rick Rogers reported that a homeowner in the Chicago area, a school teacher who had been trying for a couple years to get her loan modified had not been approved… and her home was going into foreclosure. She kept trying though until one day this past fall she received a letter that appeared to say that Bank of America was now approving her loan modification. Read More at Mandelman Matters

Uncertainty in the Loan Mod Process is Barrier to U.S. Economic Growth 2-21-2014
"...why doesn't anyone talk about the monument to uncertainty that's been placed square on the collective chest of the American homeowner... the loan modification process? It's the proverbial life preserver for the underwater homeowner at risk of losing a home to foreclosure that sinks more often than it floats... and often times no one knows why. And it's the poster-child for uncertainty.'' Read More at Mandelman Matters

Friday, January 10, 2014

Latest Foreclosure News 1-10-2014

What the new mortgage rules mean for you 1-10-2014
New mortgage lending rules are going into effect Friday that aim to put an end to the worst mortgage lending abuses of the past... The new rules are designed to take a "back to basics" approach to mortgage lending and lower the risk of defaults and foreclosures among borrowers, according to the Consumer Financial Protection Bureau, which issued the new rules. Mortgage lenders are being asked to comply with two new requirements: The Ability to Repay rule and Qualified Mortgages. Read More at CNN

How the CFPB plans to empower homeowners 1-8-2014
The Consumer Financial Protection Bureau is living up to its name — putting consumers first as the bureau rolls out tools to help borrowers hold financial firms accountable... The CFPB intends to make homeowners more empowered to fight back. Just this week, the bureau announced a series of materials – from sample letters to new mortgage rule guides. All of those materials aim to educate borrowers on when a bank has violated a key mortgage provision and how to resolve those errors. Read More at the HousingWire

Florida housing market may get a boost from ‘boomerang buyers’ 12-28-2013
Founders of the San Diego-based company AfterForeclosure.com said last week that millions of banned borrowers nationwide will be eligible for a mortgage next year, while Jupiter mortgage broker Skip McDonough said his firm is already doing deals with home buyers who were forced into default during the housing bust... Under the FHA's "Back to Work" program, it will approve certain borrowers for a home loan just one year after a foreclosure, short sale, deed in lieu of foreclosure or bankruptcy. The FHA's previous timeline was three years for a short sale and foreclosure and two years for a bankruptcy. Read More at The Globe and Mail


Monday, November 25, 2013

Latest Foreclosure News 11-25-2013

Both the Fair Housing Act and Civil Rights Act were designed to protect consumers and homeowners from being trampled in the way they have been repeatedly… if you were told you did not qualify to apply, should not apply, or otherwise discouraged from applying for a loan or modification for any reason it could be a Fair Housing violation; if you believe you are qualified for loans you can repay to keep you in your home but believe you have been improperly denied a loan or modification it could be a Fair Housing violation; if during the course of the loan, from beginning to now you believe you were discriminated against, treated differently, or harmed by your Servicer or Lender it could be a violation of the Fair Housing Act. Read More at The Huffington Post

With home prices on the rise and foreclosures down nearly 30 percent from this time last year, the major issue distressed homeowners face today is the lack of laws that mortgage servicers are forced to abide by… During the housing crisis, the sloppy and unscrupulous collection practices were exposed as millions of homeowners could no longer afford to pay their mortgage. Because of this, various laws came into play and the CFPB has established a new set of rules servicers must follow – beginning January 1, 2014. Read More at LoanSafe

The Massachusetts Division of Banks has adopted amendments to its debt collection and loan servicing rules that prevent third-party mortgage servicers, including banks, from foreclosing on mortgaged property if an application for a loan modification is in process. The amended rules, which became effective on October 11, are meant to complement the recently adopted foreclosure prevention rules that require home mortgage lenders and servicers to modify certain mortgage loans if the cost of modification is less than the cost of foreclosure, according to the Division… Under the amended debt collection and loan servicing rules, third-party mortgage servicers are required to consider options to avoid foreclosure and third-party mortgage servicers are prohibited from initiating a foreclosure when an application for a loan modification is in process, a practice also known as “dual tracking.” Read More at Lexology

Wednesday, July 31, 2013

Latest News 7-31-2013

New law tightens foreclosure rules in Minnesota 7-31-2013
Minnesotans who have struggled to make their mortgage payments will get new leverage for saving their homes beginning Aug. 1 under a law that tightens foreclosure rules in the state. The new law doesn’t necessarily spare homeowners from losing their properties… it seeks to ensure that eligible borrowers have fair and clear access to every available option to avert foreclosure. The law also bans so-called “dual tracking” of foreclosures… [Where] a lender and/or mortgage servicer can’t move to sell a home until the borrower has had a fair chance to seek a loan modification. Read More at MINNPOST

Boca Raton homeowner wins multi-million dollar foreclosure suit after legal misstep 7-26-2013
A Boca Raton homeowner whose waterfront mansion has been in foreclosure since 2008 had her case voluntarily dismissed by her lender Thursday in Palm Beach County court after a legal misstep during trial. Homeowner Valerie Kaan bought the 13,000-square-foot home in 2003 for $8.4 million. The outstanding balance as of Thursday was up to about $10 million… “Maybe this will send a message to banks that when people come to the table in good faith with a reasonable offer, they should more seriously consider it,” said homeowner attorney Roy Oppenheim. Read More at The Palm Beach Post

Lenders seek court actions against homeowners years after foreclosure 6-15-2013
Lenders are filing new motions in old foreclosure lawsuits and hiring debt collectors to pursue leftover debt, plus court fees, attorneys’ fees and tens of thousands in interest that had been accruing for years. It’s all part of a legal process known as a “deficiency judgment,” which is allowed in the District and 40 of 50 states, including Maryland and Virginia. Freddie Mac spokesman Brad German said Freddie Mac is targeting “strategic defaulters,” which the agency defines as “someone who had the means but chose to go into default, that there were no extenuating circumstances that affected their ability to pay…” Read More at The Washington Post

Monday, January 14, 2013

Strategic Default Monitor Alert: Zombie Foreclosures - When Banks Walk Away

It appears that banks have decided to strategically default by walking away from a property. Homeowners need to understand the potential risks when a bank decides to abandon foreclosure proceedings against a property.

We routinely discuss the primary risks of a strategic default. The primary risks of a strategic default are:
  1. Deficiency debt can lead to a deficiency judgment. 
  2. A property can be lost in a foreclosure action. 
  3. Lower credit score. 
  4. Exposure to aggressive debt collection tactics. 
  5. Personal liability for unpaid taxes, utilities, or other property related expenses. 
  6. Government action against homeowners that strategically default. For example Fannie Mae may not allow home loans to individuals who strategically default. Recently it was reported that the Federal Housing Finance Agency ("FHFA") intends to aggressively go after individuals who strategically default on a government insured home loan. However a FHFA official released a statement claiming that it will not be the policy to seek out people who strategically default. The bottom line: The government has its eye out on strategic defaulters. 

Sunday, November 4, 2012

Got Questions? Get Answers... JSW is Concerned About His Future Finances So He Can Protect His Family

Got Questions?

Hi, I bought my current home in August, 2001. I have made each and every payment on-time the entire time I have owned the home. I have exceptional credit (850 FICO). I have tried to sell the home 3 times. At present, it is listed for sale. I have it listed $7,000 below what I owe on the mortgage and I have no takers. Sadly, it backs to a busy road and has a small backyard. However, it is well taken care of -- almost new -- and considerably upgraded. I just can't seem to sell it. I don't even think I could get someone to buy it even at $200K. And now, it looks like Romney is going to win the election and repeal the mortgage interest deduction. I currently take $35,000 in deductions just in mortgage interest alone. Even with his so-called cuts, it will be a huge tax increase for me. I can't afford it. I'm already supporting my parents and my brother who is currently out of work.


I would like to strategically default on the property, but I don't know if that is the best option. What would be your advice? I think I am too far off the mark for a short sale since I don't think it would sell even at $200K. It is sad because the home is in a very nice affluent community where the average incomes are over $100,000 annually. And, I don't think the bank is going to work with me at all in taking back a property that is clearly worth much less than I owe on it. I feel I got the short end of the stick and that it isn't going to get any better unless I do something. Even trying to sell it at a loss, I'd be clearing my 401K to do so and no one will step up and buy it.


What do you think? Is strategic default the right option for me?


Kind regards,


JSW


 

Get Answers...

Monday, October 15, 2012

Strategic Default Best Practices: Consider The Tax Implications

In this article we will explore how to properly analyze a strategic default in connection with any potential tax liability. This is the first article in our new series: Strategic Default Best Practices

Many homeowners who have strategically defaulted now recognize it can several years for a lender to collect a debt or to foreclose on a property. In fact, many homeowners continue to live in and/or rent their property while strategically defaulting.


It stands to reason that a homeowner who strategically defaults intends to be in a better financial position.  The homeowner has not made mortgage payments for several years while living in and/or while renting part or all their property. What a paradox?  By not making mortgage payments a homeowner can potentially improve their financial profile. In fact a properly implemented strategic default can create a better financial future for you, your family, or your business. Keep in mind that maintaining a good credit score is not possible when implementing a strategic default. Thus a “credit score" is not an important financial consideration during a strategic default. The primary goals of a strategic default are to protect and increase cash flow, to protect and increase savings, and to protect and preserve wealth/assets; all with the aim of reducing or eliminating the total debt and/or any tax. 


There is no free ride when it comes to not paying a debt. In our book, Strategic Default: How To Create A Better Financial Future for You, Your Family, or Your Business we outlined the principle "Debt Is Similar to the Physics Principle of Matter and Energy". There is a principle in physics that matter and energy can neither be created nor destroyed; they can only be rearranged. Debt follows the same lines. Once debt is created it cannot be destroyed unless it is restructured and resolved. Therefore, if a debt is not settled or resolved, then the debt will remain as long as the creditors are legally allowed to chase you for it. For example, a money judgment can last for 20 years in New York. Original lenders and 3rd party debt collectors will always attempt to collect unpaid debts plus interest and penalties. The tax authorities (IRS and states) will always attempt to collect taxes on forgiven debt and/or rental income. Keep in mind that the Mortgage Forgiveness Debt Relief Act ("MFDRA") provides a tax exemption for forgiven debt in certain circumstances. However, the MFDRA is set to expire December 31, 2012 unless the federal government renews the law.