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1. It's very final. Stratefic default will lead to
foreclosure by the lender. Foreclosure will negatively impact your credit
report and scores. In fact, only bankruptcy will affect your scores more
adversely than foreclosure. |
| 2. The default will remain on your credit report for seven years. Since
credit scores are based on information in your credit report, the
foreclosure will greatly impact your credit scores during those seven
years. Securing other credit at reasonable terms and rates will be very
difficult, if not impossible, during that time. |
| 3. Potential lenders aren't the only ones looking at credit reports thse
days. Insurers, employers and even cell phone companies are considering
the credit worthiness of those who want to do business with
them. By impacting your credit report, a strategic default may affect your
ability to get a job, secure insurance and enter into important service
contracts. |
| 4. Fannie Mae, the government-controlled mortgage giant, announced
on June 23 policy changes that will make you ineligible for a new
Fannie-Mae-backed mortgage if you walk away from a current mortgage that
you actually could afford to pay. The ineligibility will last for seven
years from the date of foreclosure. |
| 5. Finally, in some cases, the debt that foreclosure "erases" may be
recorded as income, which means you will have to pay taxes on it. |
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Strategic default may seem like 'walking
away' from a bad debt, but it's really anything but. While you will
no longer have to pay the actual debt, you'll almost certainly 'pay' in
other ways, in the form of lowered credit scores and a drastically
curtailed ability to secure future credit for the next seven years. Higher
interest rates and unfavorable terms could end up costing you more in the
long run than continuing to pay on an upside-down mortgage. For more
information go to www.Experian.com.
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