Rising Strategic Default Rates
Preferred Financial Services, Inc analyzes the recent news of rising Strategic Mortgage Defaults….
Andover, Massachusetts May 3rd 2010—Preferred Financial Services has analyzed and reviewed the recent news of a rise in the number of strategic mortgage defaults occurring throughout the country. The economy has hit everyone hard, and homeowners were not spared. The first casualties were those consumers who were given loans with little ability to pay it back for overpriced homes during the peak of the housing bubble. These sub prime lenders took advantage of the availability of cheap credit while assuming that the good times would never end. They did, and these were the first people to file for bankruptcy and see their home be foreclosed on. The recent rise in strategic defaults shows a shift away from those who can’t afford the payments to those who choose not to make the payments.
What would drive someone to just stop making payments? In general, these people own homes that are now valued below their remaining mortgage balance. With their mortgages “under water”, many homeowners see their continued mortgage payments as a complete waste of money and instead choose to focus on their unsecured consumer debt. This is partly responsible for the recent rise in consumer spending with no comparable rise in employment. The other group of homeowners that are turning to strategic defaults are those looking for a loan modification. Many creditors do not offer better rates or reductions in principle as long as the payments are current. This is forcing many who are facing foreclosure in the mid term to opt for a strategic default now and force the banks to the negotiating table.
While some homeowners see this as an easy way out of a mortgage with negative equity, a strategic default is just as damaging to a homeowners credit as a conventional default. The late and missed payments will cause a long term dip in your credit score and future lenders will see that you walked away from a previous obligation. While it can be beneficial in the short term, a strategic default can cause much more damage in the long term. Paying off unsecured debts while nice should be secondary to your secured debt payments. In general, credit card debt and other unsecured debts have much higher interest rates, and thus you are paying far more in interest with those accounts. Even if you lose the home to foreclosure, you will still need to find a new place to live in, and your savings will not be what you had planned.
Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.
For more information, please visit: www.pfsdebtrelief.com
Contact:
Stephan Tavernini
Original Article by Jody Shenn
http://news.yahoo.com/s/bw/20100511/bs_bw/1020b4178045116389
