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Sinking Home Value + Inability to Pay = Strategic Default? The Pros and Cons for Illinois Homeowners

Posted on in Bankruptcy

According to an article published by the Chicago Tribune, Illinois homeowners plotting to strategically walk away from their homes is not an alarming new trend. For years, homeowners who have been feeling the sting of the housing market whims have often turned to an experienced Strategic Defense attorney to discuss Strategic Default of their mortgage as a method to relieve persistent debt concerns.

Joanne Gaskin, director of product management for scores at FICO Inc. believes “that this is not a problem that is going away”. It is also reported that the Chicago area is conducive to this form of debt relief due to three primary circumstances:

  1. Although the housing market is experiencing a slight rebound, some homeowners are still experiencing a negative equity balance.
  2. Illinois foreclosures, processed through the court system, are over their heads in paperwork. From default to foreclosure some homeowners are living mortgage-free up to and over one year's time.
  3. In a recent national consumer survey, Fannie Mae reported that 27 percent of homeowners feel no loyalty to their homes as they strategically walk away to alleviate financial distress.

Of course, this is not a decision homeowners make hastily. Opting to default purposely on your mortgage leaves a cautionary black mark on your credit and often paying rent at nearly the same monthly expense as their mortgage. Further more, homeowners in Illinois, Ohio and Pennsylvania may even find themselves facing a lawsuit filed by their mortgage holder.

If you reside in Illinois and are currently “under water” as your mortgage loan is higher than the home's market value and are seriously considering Strategic Default it may be in your best interest to consult with an Illinois attorney experienced with the process to further discuss the following pros and cons:

Pros

  • As mentioned, courts are often overwhelmed with mortgage foreclosures. If you opt for Strategic Default you free up the time you spend in your home, mortgage free until the legal proceedings are finalized.
  • A Strategic Default provides extra cash in your pocket. Sans your mortgage payments you can either find alternative living arrangements at a lower monthly cost or if truly in financial distress, use the surplus to ease down debt.

Cons

  • As mentioned, your credit report. Strategic Default can lower your credit score by up to 300 points and will remain on your report for seven years.
  • You may have difficulty securing new living arrangements because of your credit report and FICO score.
  • In the event you decide you want to once again purchase a home lenders will not consider your application for up to seven years.

This is not a decision to be taken lightly. It is evident that there are homeowners who decide to walk away even though they are capable of affording the payments. Then there are homeowners who are experiencing true financial hardship. It remains a personal decision.

Plot your course wisely. The legal team of Newland & Newland, LLP can help. Strategic Default and Trial Lawyer, Gary A. Newland has been involved in several class action suits against the large lenders and will assess your situation to determine your best possible recourse and if Strategic Default is in your best interest. We offer personalized service to residents of Cook, Lake, DuPage, McHenry, Kane and Will Counties and look forward to discussing your options. Contact us today to schedule your free phone consultation today.

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