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In a recent study, the Chicago Booth/Kellogg School Financial Trust Index found that a full 36% of Americans would consider “strategic default”—another term for walking away from your mortgage—if they were underwater or facing a short sale situation (owed more on their home than what it was worth).
Now that more than one in four homeowners is upside down on their mortgage, we feel that it’s important for the community to know the truth about strategic default.
The truth is the foreclosure process carries with it credit issues, current and future employment challenges, issues with security clearance and possible debt collections.
3 Reasons the Term “Strategic Default” Is Misleading
That’s why it is vital to explain the 3 reasons why the term “strategic default” is misleading:
- There’s nothing strategic about defaulting on purpose, especially when you have options like short sales, mortgage modifications, and refinance (just to name a few) that may keep you from foreclosure.
- The waiting periods to apply for a new mortgage loan are at least five years less in a short sale vs. a foreclosure.
- A foreclosure will show up on your credit report every time you apply for a home loan, car loan, new job, etc., and will affect your financial situation for many years to come.
If you are underwater and can no longer afford your mortgage payments, you need to create a genuine strategy to avoid foreclosure, helping to provide stability for you and our community.