PHOENIX - Each Sunday, ABC15.com debuts an Arizona issue - along with two opposing sides on the topic.
Don’t worry, you always have the opportunity to make comments at the bottom of the page. Yeah, your opinion matters, too.
This week we’re tackling the debate on whether or not it’s a good idea to foreclose on your home.
Tracy W. Smith with HomeSmart Realty says she respects all of those that honored their mortgage contract and held up neighborhood stability.
Dean Wegner with WJ Bradley Mortgage Capital says you have to do what's best for your family and not put your mortgage company above your family's well-being.
Click “next page” to read the first of two positions, “Put family's well-being above your mortgage company”.
“Put family's well-being above your mortgage company”: By Dean Wegner with WJ Bradley Mortgage Capital
Many homeowners have elected a process to knowingly default and stop making mortgage payments to start foreclosure called "strategic default". As author of the book "Life After Foreclosure" I have spoken to thousands of people that have gone through the foreclosure process, some had no choice due to things such as loss of job, others with thousands in the bank have decided that the home will take a decade to re-coup and mathematically they can buy again in 3 years. Most of these people find that the majority of the stress is before and during the foreclosure or short-sale process. (A short-sale can be a form of strategic default in that you decide you are better off without a home substantially underwater, the difference is you have to qualify for a short-sale from your lender)
My personal opinion is you have to do what's best for your family and not put your mortgage company above your family's well-being. Your mortgage contract stipulates that the most you can lose is your home. Think about this: Making payments on a home that will take 10 years to recover and net zero, and making a "housing" payment often, twice as much, consider this. A person that decides on strategic default over "waiting it out" could find they are $100,000+ ahead in ten years. That could equate to retiring 5 - 10 years earlier. So, are you working to keep your mortgage companies door open or yours?
Many people cling on to the fact they have perfect credit and couldn't imagine having less than a 700 fico score. The truth to that is, what are you going to finance in the next 3 years that requires perfect credit? Most strategic default involve one trade line which is your mortgage so the actual damage from what we have seen is minimal fico loss. The statues in Arizona are favorable if you consider strategic default but in cases with second mortgages taken out after your purchase you could be liable and therefore should always seek an attorney in all cases before breaching any contract.
Another fact to consider about strategic default and protecting your assets is this. On January 1, 2013 "The Mortgage Forgiveness Act and Debt Cancellation" of 2007 on Primary Residence will expire. It will be taxed on your income tax bracket so if your 28% and your lender sates $100,000 loss then you will owe the IRS $28,000. http://www.irs.gov/individuals/article/0,,id=179414,00.html
In closing my most often asked question is when can I buy after a foreclosure or short-sale. After all part of the strategic default process is to capitalize on low home process and start the traditional role of homeownership which is an investment. If you utilize a popular home loan called FHA, you can buy in as little as 3 years, with 3.50% for down-payment and a 640 fico score after a foreclosure or short-sale. If you are a Veteran you can buy in 2 years after short-sale or foreclosure. In certain cases after a short-sale with Fannie Mae financing you can buy in 2 years with 20% and a high fico score. Also on FHA loan you can buy 2 years after a Chapter 7 bankruptcy.
Do you agree with this opinion? Add a comment below to sound off.
Click “next page” to read the second position, “ Honor your mortgage contract”
“Honor your mortgage contract”: By Tracy W. Smith with HomeSmart Realty
In my view if everyone paid there mortgage payment on time we would have no housing crisis. In fact home prices would have moved down a little but no where near the amount we have seen form the so called strategic-defaulters. It created the downward spiral that we see today and created a giant housing hole we are slowly crawling out of. Its interesting that we as Americans hold on to our word so highly, this as our integrity for who we are as a leading culture, but somehow this does not apply when we committed to the largest purchase we ever made. Somehow our mortgage came with a guarantee that said in the event your home value declines you can stop making payments and we will be just fine with that, who cares if you drop your neighborhoods value and send our beloved country into the worst recession since the great depression.
The truth is when home values were going up, no body thought of defaulting their mortgage to "get out of it." Every lunch table in town the conversation was how great the market is doing and how much equity they have now and how they are buying investment properties. Nobody called their mortgage company or the banks crooks. But now all of a sudden they are the bad guys, are they really the bad guys because if home prices were still up would you be mad? I see this anger for people to rationalize and default on their home loans and seeing the market further down the drain. Most peoples intentions are to pay the loan off and live "free-and-clear" trough retirement. If your plan was always that then why would it change because of what happened around you. You only lose the money you think you had when you sell, what if you never sold? Did you ever lose?
In addition to rationalization I see from angered homeowners about the market I also see a country that is doing their best to put the pieces back together. In a few months HARP 2.0 will come out to help those "that hung in there" This is for the people that put 20% down, documented their income, did everything right, living the American dream and ended up losing 50%+ of their home's equity. Every time mortgage rates dropped these people would take advantage of the low APR's and improve their families budget. But since home vales dropped they are faced with hearing, NO - You can not finance this time. It must be very frustrating to "hang in their" just to be told no because you did everything right. This program will have no appraisal and will help these people take advantage of rates near the 4% 30 year fixed range. This is due out the first quarter of 2012.
In closing I respect all of those that honored their mortgage contract and held up neighborhood stability. We built this country with great men and women and they say it is then when you have time of greatest disparagement is when you see the greatest strength of character.
Do you agree with this opinion? Add a comment below to sound off.
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