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Strategic Default Plan Your Financial Future
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Strategic Default: Would It Work With
Truck Loans?
"What is Strategic Default?







Strategic default is a popular strategy for not paying a mortgage. Will truck loans and
automobile loans be next?

Strategic Default occurs when homeowners decide to stop making mortgage payments,
although they have the financial resources to make the payments. In some circles these
borrowers are called "walk-aways". They walk away from the house and the obligation. But
recently many homeowners choose to stay in their houses. In some neighborhoods, it takes
the bank more than a year to get possession of the house and to evict the homeowner.

Many see their decision as a business opportunity to get out from under a heavy debt. If the
mortgage balance is $600,000 and the house is only valued at $400,000, and all avenues
have been explored, including loan modification from the lender, it might be their only option.
They see this as the same motivation of banks or lenders. The banker and lender want to
maximize profits and cut losses.

Others are haunted by the stigma of a failure and foreclosure. They feel a moral obligation to
pay their debts. This sticks to the core of their value system. And come hell or high water they
will not walk away. They will stick it out to the very end. Many in this group will end up in
bankruptcy.

Several "walk-aways" are rebuilding their lives and their bank accounts. Let's face it, a house
is a major expense. You have mortgage payments,
house insurance, taxes, repairs and
upgrades. There's always something to take your money. When house values were going
through the roof...no problem. But with the current housing crisis, it is tough to spend the
money knowing that it would take another 10 to 15 years for house values to reach the levels
of 2006..

Renting seems a good option, and many "walk-aways" are doing just that. With the inventory
of houses at an all-time high, finding a good deal on a rental is not an issue. Many are still
living in the same neighborhood, and their children still attend the same schools and have the
same friends. The quality of life style has not deteriorated. On the contrary, some people are
living better. Some are taking vacations, going on cruises, and still have some extra money
left over each month.

Strategic default is not a crime. No one plans to lose money, lose their house, and be
uprooted from a home where there were so many fond memories. However, when there is a
cash-out
refinance and the loan payments cease 60 days later, we can argue for a borderline
case of fraud. We would have to look at each case separately, and leave it to the lawyers.

Your credit score will suffer with a strategic default.

You can expect your
credit score to plunge about 100 points after the strategic default.
However, if you use some of the money you saved by not paying the mortgage, and pay off
your other debts, the score will improve. Smart defaulters pay off the credit cards and the car
loan. When they are ready for a new mortgage, in about 18 months, they would be loaded
with cash and a rising credit score.
More Default Info