Strategic Default Monitor – How To Strategically Default

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.