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Leona Greenlow-Turner

Strategic Default

I just read this article on Strategic Default from 5/13/2011: http://www.dsnews.com/articles/survey-more-underwater-homeowners-open-to-strategic-default-2011-05-13

Strategic default, really? Congress, as I am writing this blog, is thinking of the best way to stop strategic defaulters: deficiency judgments and lawsuits.

Check out these articles:

http://blogs.wsj.com/developments/2010/06/10/congress-may-bar-strategic-defaulters-from-fha-loans/

http://washingtonindependent.com/87547/house-bill-penalizes-strategic-defaulters

And House bill HR 5070

Is a future law suit really worth walking away, especially if you can make your payments? Modify your loan or sell it, don't harm your future livelihood by walking away. So many homeowners need real help and cannot afford to make a mortgage payments let alone a water bill payment and the more fortunate are walking away and buying new homes. I’m having a real problem with this line of thinking. There are banks that are making an effort to help homeowners who are in distress. And the truly distressed are walking away because it’s the popular trend. The most popular choice is not the best choice. Strategic default IS a bad choice.

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Ask questions about the real estate market for distressed homeowners and what is your best strategy. You can also email your questions to: Leona@LeonaTurner.com

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Published Thursday, May 26, 2011 11:26 AM by Leona Greenlow-Turner

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Pat said:

As a realtor you need to know that the problem with a short sale/deed-in-lieu with big lenders like BAC is they ask you to sign a Promissory Note for any deficiency, which constitutes prima facie evidence of the original note they can use against you later. That severely limits the borrower’s defenses to any deficiency judgment in recourse states where MERS Corporation is named Mortgagee. Two federal courts have found that because MERS (or its assignees) didn’t hold a beneficial interest in the notes they were foreclosing, they couldn’t claim the money in judicial proceedings. It doesn’t prevent them from foreclosing in non-judicial states but creates a formidable defense for any borrowers defending himself from a deficiency judgment brought by a MERS assignee. Only the original investor(s) who funded the loan would have legal standing to collect any deficiency brought in behalf of a MERS-securitized mortgagee in a recourse state.

If you can convince the servicer to waive the deficiency (good luck!) in writing then a short sale is for you, otherwise just default and let the chips fall where they may. It will cost the bank a lot more to recover that deficiency than it’s worth the vast majority of the time, esp. if it’s a MERS note.

Read more: http://wellingtonshortsaleagent.com/what-is-wellington-short-sale-strategic-default/#ixzz1ODxvVLlB

June 3, 2011 7:04 AM
 

Leona Greenlow-Turner said:

Thanks for your feedback. I have had a few lenders waive the deficiency. I'm completing two with Bank of America and I will make sure to update this blog with the results.

June 5, 2011 7:31 PM

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