Where Does Strategic Default Fit In?


We have never advised a client to stop paying their mortgage, nor do we expect to give that specific advice. What we DO tell our clients, on a nearly daily basis, is to protect themselves, and protect their families.

In recent weeks we have spoken to more and more homeowners who, six months to a year ago, suffered a death of a spouse, major health challenges, business failures due to the economy, or other events beyond their control that impacted their ability to pay their mortgages out of current income. Many of these families had savings, or perhaps retirement accounts that they could tap to make up the difference. Some of them lived off their credit cards, to be able to keep paying their mortgage.

Where are they today? More underwater than ever, and now completely unable to pay the mortgage, and in the same situation as a year ago, except THEY HAVE LOST THEIR SAFETY NET, having given it to their lender. It is heartbreaking to talk to such people, and it makes one truly question the morality of the choices involved. I remind people who are tempted to sacrifice their financial future that the lender will NOT fondly remember their sacrifice in the name of keeping the payments current, and give them any consideration at all when they are finally tapped out. The Lender simply won’t do that. Instead, they will put you down as swiftly as they can.

A huge number of the people we talk to are seeking loan modifications, or the blessing of the lender to sell their home at a loss (i.e., short sale). But they quickly find that the lender is NOT their ally in that effort. Rather, the lender will push a foreclosure through long before they will approve that short sale or modification being dangled before your eyes. What is that behavior, if not immoral?

Given the disarray in the lenders tracking of mortgages, in a great many cases they simply can’t demonstrate (with anything but forged documents) their right to sue you for foreclosure. But, if you don’t hire an attorney and fight them, you LOSE EVERYTHING.

All the most important things I know, I learned from my father. The first (and most important) thing is, you have to stand up and FIGHT for what you want. Lenders are depending on you not doing that.

Those who are among the 80 to 95% who don’t hire a lawyer and fight the lenders will find themselves among the first of the vanishing middle class to wake up one morning to discover that they (and their families) are on the wrong side of the Great American divide between the rich and the new poor.