Tampa Palms, Westchase, Carrollwood and Tampa Bay Real Estate News From Jeanne Prigitano

So, what is a Strategic Default? A Strategic Default is when a borrower can afford the mortgage payment but chooses not to pay (defaults) because the value of the house is less than what is owed on the mortgage (upside-down, underwater).

I’ve read many articles lately that give a variety of reasons why this is okay and even a great “strategy”. Here are just some of the many reasons that are given:

• The banks are to blame for giving these bad loans so they should take the loss.
• Why should I throw good money after bad? It’s not a financially sound thing to do.
• It was a bad investment. Why should I continue to “support” a bad investment?
• It’s a business decision.

I am sure that there are reasons why defaulting on a loan is inevitable and unavoidable. I’m also sure that most people will not do so lightly. However, what happened to personal responsibility. When the bank gave you this “bad” loan did they twist your arm? Did you take out an equity line to buy cars, boats and vacations? What about the people who paid cash. Should they get their money back because the house is worth less? Why should they pay the price for the spending of others? If people who can pay walk away from their obligation and abandon their home doesn’t it bring down the value of all houses in the area and just feed the problem. What if there are homeowner association fees that are not being paid. Now the remaining homeowners must carry the burden for the non-payers.

Yes, something must be done. There are those who truly need help and yes, something should be done for those who can pay. Is Strategic Default the answer? What do you think?