Real Estate’s New Buzz Term

Strategic Default In San Mateo

The other day I was talking to a friend about his rental house in San Mateo.  He said he was thinking about just walking away even though he has a paying tenant and has a little bit of a negative between what the tenant pays and the mortgage.   It’s not that he can’t afford that negative.  He’s just sick of paying it.

What he’s talking about is  called a strategic default.  Wikipedia defines it as the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments.

Fannie Mae is putting  strong deterrents in the way of those wanting to strategically default.  They’ve put policy changes into effect that should make home owners think twice.  Fannie Mae is trying to encourage home owners to figure it out through short sale or loan modification.

If Fannie Mae discovers that you’ve walked away from a house that you could afford not only will they decline giving you a loan for the next seven years, they’ll come after you for the money you defaulted on.

Whether they’ll be able to pull it off and if  they’ll actually be around for the next seven years is being questioned by analysts.

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