As more homeowners fight to save their homes and find a way out of the foreclosure process, many new “options” are popping up around the country claiming to bring big benefits to those in need. One of these solutions is being called a strategic walk-away, meaning the homeowner voluntary walks away from their home in foreclosure allowing the lender to take it back. While not much is known about the effectiveness of this strategy, there are some things to know about what this process entails.
There are several different types of mortgage relief companies operating to provide services to underwater or at risk homeowners. The newest of these companies is offering help to voluntarily abandon their homes that are in the foreclosure process. Sounds counterintuitive right? After all, why would a homeowner want to allow a foreclosure to happen when they could resolve their debts through loan modification or a short sale?
Also part of a strategic default process, a walk-away essentially encourages a homeowner to stop paying their mortgage payments on purpose and save the money while the foreclosure process is completed. In judicial foreclosure states it can take several months to over a year before the foreclosure is completed, leaving homeowners free to stay in the home until the process is complete. By withholding payments homeowners feel they can save their money until they are evicted from the property.
Despite gaining popularity, many real estate professionals and foreclosure lawyers are advising against this strategy. First, not everyone can pull it off. Homeowners that live in non-judicial foreclosure states can find themselves evicted within 30 days. Second, purposely missing payments can ruin chances at successfully obtaining a mortgage modification or short sale agreement. Last, the damaging of effects of a foreclosure, voluntary or not, can have serious ramifications down the road. Damaged credit and extreme difficulty in securing future loans are highly likely after a strategic walk-away.