Ask The Money Coach

Archive for the ‘Foreclosure’ Category

The Occupy Wall Street movement is gaining steam all across America, and one of the key flashpoints right is in the San Francisco area, where a woman may ultimately be heralded as the movement’s Rosa Parks.

In one section of San Francisco called the Bayview District, which is predominantly an African‑American neighborhood, there are more than 1,400 homes on the verge of foreclosure, according to data from RealtyTrac.

Continue reading “Will This Woman Go Down as the Rosa Parks of the Occupy Movement?” »

Related Questions:

• medicine inurl:/sign asp
• friend inurl:/write asp
• list inurl:/new_message asp
• compensation inurl:/default asp?action=
• month inurl:/write asp
• processing inurl:/comments asp
• following inurl:/write asp
• carolyn gage foreclosure
• francisco inurl:/default asp
• occupy quesada
• poor inurl:/comments asp
• Carolyn Gage foreclosure San Francisco

We keep hearing a lot about strategic defaults and about how people are increasingly walking away from their homes because they see them as bad investments.

Up until now, a fairly clear picture has emerged of the profile of the average strategic defaulter. Research shows that these individuals typically have better FICO credit scores, larger mortgages, and smaller amounts of credit card debt.

What is less well known is how strategic defaulters are handling their finances in the wake of abandoning homes that are underwater.

Specifically, what are strategic defaulters doing with all the money they save by not paying their mortgage? Some have called this money “squatter’s rent.”

Call it what you want. But here are 7 ways homeowners are using their cash when they decide to let banks foreclose on their properties:

1.     Saving money for a new home.

Although the brutal housing downturn has soured some people on homeownership, many people engaging in strategic defaults say they’re actually squirreling away money for their next home. Some will buy a cheaper home before the foreclosure hits their credit reports. Others will re-enter the homeownership arena when their credit rating rebounds and the housing market stabilizes. But either way, a group of strategic defaulters are tucking away dollars for the next place they plan to purchase.

2.     Entering into long-term rental agreements

For people who’ve decided that right now – and maybe forever – they’ve had it with homeownership, they’re looking to rent a place to live. And that takes cash: often first and last months’ rent plus a security deposit. So some strategic defaulters are saving their cash to rent a new residence.

Additionally, some homeowners turned renters are using their cash stockpile as leverage with landlords. With the ability to pay a few months, or even as much as a year’s rent in full, savvy strategic defaulters can often make even the most skeptical landlord overlook any blemishes on the individual’s credit rating. Some strategic defaulters even negotiate discounted rents based on how much cash they’re willing to pay a landlord upfront or their willingness to sign a long-term rental contract.

3.     Paying off debts

Other strategic defaulters are paying off all their other debts – like their auto loans or credit card bills. This fits the classic definition of a strategic defaulter. It’s some who, by all appearances, seems to have the financial wherewithal to make their mortgage payment, but who chooses not to – even as the person does manage to keep up with all their other bills.

Jon Maddux, CEO of YouWalkAway.com, notes that there’s one good reason to explain why strategic defaulters often use the cash they saved during the foreclosure process to pay off revolving debt, like credit card bills. Doing so, Maddux says, can “help offset” the credit sting of foreclosure, since outstanding credit card balances account for 30% of a person’s FICO credit score. In other words, it’s certainly true that missed housing payments will drag down a person’s credit score. But it’s equally true that people can simultaneously boost their credit rating – even amid a strategic default – by knocking out credit card debt.

4.     Moving Far, Far Away

With the money they save during a strategic default, some homeowners are moving far away – some across the country; some to another country entirely. Maddux knows one couple that moved to Belize for three years using the money they amassed during their strategic foreclosure. Not everyone is making such a drastic move, though. Gene Kessler is walking away from his home in New Ulm, MN and figures he’ll save nearly $16,000 to help offset his moving costs to Santa Fe, NM, where he plans to rent. “I’ve already talked to a few potential management companies and an individual homeowner,” he says.

5.     Preparing for Life on a Cash Basis

Some people going through a foreclosure now are using their strategic default as the impetus for a “back to basics” lifestyle, where they buy most things with cash and eschew use (or at least overuse) of credit. These people are simply buckling down and preparing for whatever might lie ahead. They know their credit rating is going to take a temporary hit. They know that it might be more difficult for them to obtain credit – at least in the near term. So they’re preparing for life on a cash basis by building a sizeable nest egg now.

6.     Eliminating Medical Bills

High medical bills are the root cause of a lot of financial problems in America, including big credit card debts and bankruptcies. In fact, 50% of all bankruptcies in the U.S. are tied to medical bills. Consequently, some people are taking the money that they saved during a strategic default and eliminating out those sky‑high medical bills in a bid to stave off bankruptcy.

7.     Guarding Against a Deficiency Judgment

Reports about banks and collection agents going after homeowners for “deficiency judgments” have riled many people who recently did strategic defaults or were considering doing so. In some states, if a bank has lost money on a home after a foreclosure auction, the bank has the legal right to try to recoup its losses (i.e. the unpaid mortgage balance) from the prior homeowner. Although extremely rare, such actions do occur – in far less than one-half of 1% of the foreclosure cases nationwide. Still, some cautious strategic defaulters are stashing away cash to keep on hand in the event that they get socked with a deficiency judgment, according to Maddux of YouWalkAway.com. “But frankly, you have a greater chance of getting hit by a car while walking across the street than you do of being hit with a deficiency judgment,” Maddux adds.

What do you think about strategic defaulters? Do you agree or disagree with their decisions to walk away from their properties? And if you’ve engaged in a strategic default, tell me about it at AskTheMoneyCoach.com.

Related Questions:

• kyocera inurl:/default asp
• anaesthetic inurl:/default asp
• inurl:/default asp?action= ahint
• bck inurl:/default asp?action=
• 10 commandments inurl:/guestbook aspx
• clark inurl:/default asp?page=
• music inurl:;action=display;num=
• stony inurl:/add asp
• aor inurl:/default asp?action=
• inurl:/default asp?action= agatine
• akiyesi inurl:/default asp?action=
• inurl:/e_sign asp adolescence

If you’re facing foreclosure, you may be wondering how this will affect your credit score. Missing payments on your mortgage and other bills may have already dropped your credit score by several points, and when you reach foreclosure status, you will notice a significant drop in your credit rating. If you’ve been struggling financially for a while, the foreclosure could have an even more significant impact on your credit standing now, and in the future.

Effects of a Foreclosure on Your Credit Report

Your FICO score is the most commonly-used credit score by most lenders, and credit bureaus have shared how many points you lose when you’re dealing with a delinquent mortgage. Here are the average ranges of points you lose when you’re in foreclosure:

• 40 to 110 points when payments are 30 days late
• 70 to 135 points when payments are 90 days late
• 85 to 160 points when you’re dealing with a foreclosure, short sale or deed-in-lieu

Even if you had been making your mortgage payments on time for several months and years before dealing with financial distress, the banks will report missed payments to the credit bureaus right away.

For many people facing foreclosure, the mortgage isn’t the only bill that’s late. If you are also late on your car payments, have been skipping student loan payments or are late on credit card payments, your credit score will drop within a very short period of time.

Sadly, the combination of a foreclosure and defaulting on other loans often leads borrowers down the road of bankruptcy. Declaring bankruptcy will do extensive damage to your credit rating and, like a foreclosure, will also stay on your credit report for several years.

Erasing a Foreclosure from Your Credit Report

A foreclosure will drop off your credit report automatically within seven to ten years, depending on the state you live in. When you reach the seven-year mark, make sure you get in touch with the credit bureaus to make sure that they are still not reporting the foreclosure. You may need to send them a written notice in order to have the foreclosure removed after it has expired. It’s also important to contact your original lender to have them remove the record from your credit report. Lenders are not always willing to go out of their way to do this, so a written notice and persistence may be needed to clean up your credit report.

If you do decide to apply for a loan when you have a foreclosure on your credit report, the lender may be willing to offer you loan but at a higher-than-average interest rate. In most cases, you will find it difficult to get another mortgage at an attractive interest rate, because of your credit history.

Related Questions:

• foreclosure effect on credit rating
• what will happen to my credit if i foreclose
• property tax foreclosure effect on credit
• foreclosure on credit score
• foreclosure and credit score
• should I close my credit card accounts b/c of a forclosure
• how will forclosure affect my credit
• will a property tax foreclosure affect my credit report
• what will happen to my credit score if i foreclose
• Which damages your credit score the most foreclosure or bankruptcy
• will late property taxes effect your credit scorre
• PROPERTY TAX FORECLOSURE DAMAGE CREDIT

If the effects of the recession have left you with a home or condo that is worth less than the amount of your current mortgage balance, you may have considered a strategic default. A strategic default is when a borrower decides to default on their mortgage – basically refuses to make payments – and walks away from the loan. The bank will report this to the credit bureau, but for many borrowers, the cost savings is enough to prompt this type of drastic move.

Reasons Why You Would Consider a Strategic Default

An increasing number of borrowers with very strong credit and a healthy credit history are choosing a strategic default in recent years. Foreclosure defense attorneys warn that borrowers should consider all of the long-term consequences of this type of move, but many are still going ahead with it. According to a 2009 national survey by Reecon Advisors, nearly one out of 10 homeowners, or 7.4 million, would be likely to choose a strategic default strategy if they were in a situation where their house was worth less than what was owed on the mortgage.

Many homes have fallen “underwater” from the recession, and many homeowners are finding it impossible to sell their home for a decent price. While there is always the option to wait it out and hope that the home values improve when the economy turns around, this could take several years.

Declaring that you have an inability to pay your mortgage — even when you can afford the monthly payment —puts you in an entirely new borrower category and could end up haunting you for years.

Effects of a Strategic Default on Your Credit Score

FICO reports that borrowers who choose a strategic default ton their mortgage typically lose about 150 points from their credit score. This is a significant amount when you consider that the highest FICO score you can have is 850. Unless you have a very high score – somewhere between 700 to 800+ — you could put yourself at risk for a very poor credit rating from this single move.

The effects of a drastically lower credit score include:

• Difficulty obtaining a home loan at an attractive interest rate
• Inability to open up new lines of credit
• Missing out on low-interest credit card offers
• Being turned down for even a basic personal loan or auto loan from a bank or other financial institution

Still, thousands of homeowners are choosing a strategic default just so that they don’t have to deal with a mortgage that is now underwater. If you have considered this strategy to catch up financially, remember that there are several consequences of losing that many points at once. Even if you have stellar credit, a strategic default can limit your ability to get attractive financing offers and interest rates in the future.

Related Questions:

• strategic default credit implications
• strategic default credit score
• strategic default michigan
• should i default on my credit cards
• mortgage default credit impact
• impact of strategic default
• default on credit report
• credit score mortgage default
• how does default affect your credit
• credit effects of student load default
• michigan strategic default
• what effect does a stategic default have on your credit rating