In my last post I mentioned that currently more than 25% of all American homeowners are now "underwater" (owe more on their home than it's worth). Another recent study also found that 36% of all Americans would consider "strategic default" - another way of saying they'll walk away from their mortgage - if they were underwater.

I feel that it's important for people to understand the truth about strategic default.

Foreclosure carries with it many credit issues, both current and future employment challenges, issues with security clearances and possible debt collections... to name just a few. Foreclosure also carries a heavy emotional burden that is hard to quantify, but psychologists rank it right up their with death of a spouse or losing a job.

There are 3 main reasons that the term "strategic default" is misleading:

1.   There's nothing strategic about defaulting on purpose, especially when people have options.... like short sales or refinancing or mortgage modifications... that might keep you from foreclosure.

2.   If you're looking to apply for a new mortgage in the future it will make a difference of at least 5 years less in doing a short sale vs. a foreclosure.

3.   A foreclosure will be on your credit report every time you apply for a home loan, try to buy or finance a car or fill out a job application,etc. It will affect your financial life for years to come.

If you are underwater and can no longer afford your mortgage payments, your need to create a strategy to avoid foreclosure, not a strategic way to default.

For any questions about what steps might be open to you, please call the Bass Group today at 561-251-3520 or visit our website at www.BassGroup.com