A Disturbing Trend in Real Estate

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A Disturbing Trend in Real Estate

I have been reading more and more about a trend in real estate that I find extremely disturbing. Strategic defaults are on the rise, and that is not a good thing. Just the fact that the practice has been given a name which now makes a quantifiable index scares the heck out of me. First lets define what a strategic defaults is, by definition a strategic defaulter is someone who has missed 6 months or more of mortgage payments, but has not missed any payments on other loans.Foreclosure

This has the potential to adversely affect a slowly recovering real estate market. Fannie Mae has been working on making strategic default a serious offense. The mortgage giant has threatened to legally pursue any borrowers who walk away from their loan when they had the means to continue paying. Borrowers will need to prove that they suffered hardship and could no longer make payments loan, without proving that borrowers will have wait an additional 2 more years on top of the 5 already in place before they would be able to apply for another loan.

Foreclosure NoticeWhile I understand that some people are upside down on their mortgages, I understand that some people have suffered a catastrophic medical or work issue which in turn affects their ability to pay their mortgage. Those are not the people who I am talking about however, I am talking about the people who are using this method of strategic default as a bonafied financial practice.

If you find yourself in a foreclosure situation there are programs that can help. Feel free to contact GettysburgGerry for assistance.

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Rainmaker
261,234
Barb & Sal Dragotta
Macomb, MI
Macomb County Michigan

Gerry...it is a disturbing trend and more so when you learn that some of those homeowners consult with an attorney; where in some cases they are being advised to 'stop payments' & 'turn over the keys' or more accurately 'walk away now'. [again, referencing your exemptions above]
This is happening in our state as well as in others. This lack [I believe] of responsibility in fulfilling contractual obligations is the MOST frightening part of all.  What will our society become if we renege on contractual obligations in general?   I'm glad I am the age that I am--don't really want to live in that kind of America.
Thanks for posting about this; we need to see it over & over again.
Barb & Sal   

Jul 19, 2010 04:44 PM #1
Rainmaker
267,701
John Thomas
E3 Green HOMES - Boulder, CO
EcoBroker, MSEE, MBA

Indeed it is a real problem. I suspect there will be other problems too as the industry tries to find stability.

Jul 19, 2010 04:50 PM #2
Rainmaker
729,102
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Capital Properties-Buy a home in Washington DC. Sell a home in Washington DC - Washington, DC
How much is my Washington DC House Worth?

Very disturbing. More homeowners who might be thinking about doing this should know that Fannie Mae is working hard on making this a serious offense. Great post Gerry.

Jul 19, 2010 06:36 PM #3
Rainmaker
250,366
David Monsour
Coldwell Banker Select Professionals - Gettysburg, PA
ABR - www.realty-insights.com

I wonder how the verbage in the note will hold up to some sort of persuit by Fannie Mae?  The trend is certainly not a good one, but it's seemingly the best option for some people.  I can think if a few scenarios where it would make a lot of sense (I don't agree with it but...).

Jul 19, 2010 06:55 PM #4
Rainmaker
920,606
Jane Peters
Power Brokers Int'l - Los Angeles, CA
Connecting you to the L.A. real estate scene

I find also find it disturbing.  The minute you take your brand new car of the lot, you are upside down and that car is going to continue to go down in value to almost nothing.  A house is eventually going to come back up and that house presumably was bought for you to live in and make a home.  So what is the justification for jumping ship because for the time being it has lost some value?

Jul 19, 2010 11:05 PM #5
Rainmaker
499,557
Cal Yoder
Keller Williams of Central PA East - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

It is tough to understand. The question may be, "What is someone who needs to move for job or family responsibilities supposed to do?" I guess set up a payment plan with the lender or come up with the cash for settlement. Or if they turn it into a rental what will the response of the lender? to strategically default does not make sense to me, but individual situations may be a bit more complicated than it first appears.

Cal

Jul 20, 2010 08:01 AM #6
Rainmaker
869,461
Paula McDonald
Chevaux Group, PLLC - The Woodlands, TX
CHEVAUX Group ~ The Woodlands, TX 936-203-0279

Thanks for the clairification on this as I have not heard of it before.  How are you?

Jul 20, 2010 10:28 AM #7
Rainmaker
810,260
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.

This always is a sad story. And we have been through so many like this.

Jul 21, 2010 03:33 AM #8
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