FNMA recently increased to 7 years the length of time a borrower must wait before being considered for a Fannie Mae backed loan after defaulting on a mortgage they could otherwise afford. Apparently a reaction to the widely publicized actions of so called "strategic defaults" by borrowers. These are people who treat their purchase of real estate as an investment and decide to walk away from their homes even though they can afford the payments. Although Fannie Mae mostly holds loans under $500,000 and the above-guidelines only apply to FNMA loans, default rates for mortgages in excess of $1,000,000 are on the rise. It often makes good financial sense to abandon a property that is worth significantly less than the mortgage(s) that are recorded against it.
Strategic defaults aren't a good decision for everyone. As noted above, the consequences of default not only limit your ability to purchase a home in the future, but in Michigan a mortgage lender is able to pursue a deficiency judgment following foreclosure. Before choosing to default on any debt obligation, it is wise to consult with an attorney and a financial advisor.
Showing posts with label credit. Show all posts
Showing posts with label credit. Show all posts
Friday, July 9, 2010
Friday, May 1, 2009
Foreclosure from the Bank's Perspective
http://freakonomics.blogs.nytimes.com/2009/05/01/power-question/
Foreclosure is an intensely personal event for most homeowners, but for the banks it just a business transaction. Article suggests things are likely to get a bit worse before they get better.
Foreclosure is an intensely personal event for most homeowners, but for the banks it just a business transaction. Article suggests things are likely to get a bit worse before they get better.
Saturday, March 7, 2009
Futures Index Suggest Slide in Values into 2010
http://www.nytimes.com/2009/03/07/business/economy/07home.html?hp
It appears that home values will not rebound anytime soon if this particular futures index of home values is to be believed. Although real estate markets are highly localized, it looks like no relief is in sight until at least 2010.
Personally, I believe that once the market finds a bottom, there will be a sharp, short run-up in home values as pent up demand in some sub-markets drives prices up before returning to more historic levels of appreciation. In the near term, however, when people have to move from their principal residence, renting the property or a short sale is probably still their best option.
Anything other than completely paying your mortgage in a timely way will adversely affect your credit score, but one must place a value on their credit score. Preserving a high credit score at all costs may not make sense for all individuals. A credit score simply provides access to credit and helps lenders price that credit. If an individual doesn't need credit over the short to medium term then perhaps a (dramatically) reduced credit score is not such a high price to pay for getting out from under your house.
It appears that home values will not rebound anytime soon if this particular futures index of home values is to be believed. Although real estate markets are highly localized, it looks like no relief is in sight until at least 2010.
Personally, I believe that once the market finds a bottom, there will be a sharp, short run-up in home values as pent up demand in some sub-markets drives prices up before returning to more historic levels of appreciation. In the near term, however, when people have to move from their principal residence, renting the property or a short sale is probably still their best option.
Anything other than completely paying your mortgage in a timely way will adversely affect your credit score, but one must place a value on their credit score. Preserving a high credit score at all costs may not make sense for all individuals. A credit score simply provides access to credit and helps lenders price that credit. If an individual doesn't need credit over the short to medium term then perhaps a (dramatically) reduced credit score is not such a high price to pay for getting out from under your house.
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