A strategic default is when a homeowner walks away from their home when they owe more on the home than it is currently worth. In some circumstances, the homeowner can afford to make the mortgage payments, but due to the decreased value of the home under the current market conditions, they feel it is a financially sound maneuver simply to leave their home behind and rent or try to find another home which has also lost value.
Thousands of homeowners have strategically defaulted on their homes and have left the mortgage company holding the bag. The mortgage company now has an asset for which they do not have a revenue stream. Plus, the property is now a liability because the mortgage company is obligated to maintain the property so that adjacent homes do not further lose value.
Due to the enactment of new Fannie Mae regulations, a strategic default will now have more severe consequences for the homeowner than in the past. Continue reading this post