A buzz word floating around the real estate world these days is ‘strategic foreclosure’. These foreclosures are not done because homeowners are facing hardship, forcing them to turn their keys over to the bank. No, these are homeowners that can afford to make their mortgage payments while watching their home values plummet and they now owe much more than their home is worth.
We are not immune to this trend in Boise, but compared to other areas of the country like parts of California, Arizona and Nevada things aren’t too bad. Yes our values are down, if you bought at the top of the market in the end of ’06 – beginning of ’07 yes your house is most likely worth less than you bought it for, maybe even up to 20% less. But is walking away from your house really the smartest choice? The logic of many of these ‘strategists’ is – I make a good living, my credit is going to get hit with a foreclosure but after a couple years I can get back in the game.
Not so fast buckoo. Three years use to be the norm for defaulting buyers to jump back in the game with little or no consequence. Fannie Mae recently announced they have had enough of the strategic defaulters who do have the ability to make their monthly payments by denying them federally backed mortgages when they want to ‘get back in the game’. Banks are holding a close reign on their money these days. Today you need to have darn good credit, a job and money down to buy a house. Why do you think banks will issue mortgages to borrowers that previously walked away from their responsibility? Not only are these lenders going to deny loans they are also threatening to go after these borrowers for damages. Deficiency judgments are allowed in the state of Idaho. There is also whole new breed of collections agencies sprouting up willing to spend the time going after deficiency judgments.