An increasing number of homeowners are leaving their homes through a formal process called strategic default. They are lining things up before they fall behind on their payments. These homeowners are actually using formal companies to help them get their ducks in order before they begin the process of giving up their homes so they are better off when foreclosure finally occurs. These companies are designed to help homeowners use the law to their advantage so they can get back on their feet financially. As a foreclosure cleanup business owner, you can grow your business by aligning your business with these organizations.

Staggering Foreclosure Numbers

The foreclosure crisis still seems to be in its infancy when you read some of the numbers out there. According to a survey by LPS Applied Analytics, before being evicted, the average borrower will already have been in default for 15 months, 438 days. In addition, a staggering 650,000 households have not paid their mortgages for a year and a half (figure calculated in early 2010).

What is strategic default?

What is a strategic default? According to Wikipedia.org, an online “about” website that provides the definition, history, and gist of just about anything imaginable, strategic default is a decision to suspend debt payments indefinitely, despite having the financial capacity to actually make the payment. payments But the term is also used to describe homeowners who do NOT have the ability to pay their mortgages. These are people who are allowing this system to give them a financial foundation so they can catch up, pay other bills, put food on the table, and survive in a memory economy with declining investments, layoffs, and permanent job losses.

Homemade mortgage alterations

According to a New York Times article, “home mortgage modifications” reduce mortgage payments to zero. Companies like YouWalkAway.com are strategic default companies. Some call themselves foreclosure agencies and their goals are to empower the homeowner to regain control of their finances. They educate the homeowner and provide the necessary resources, support, and tools as they prepare to go through the foreclosure process. Owners can generally live rent-free for eight months or more.

Some lawyers are even on the strategic defaults bandwagon, submitting forms with similar verbiage:

“Want to keep living in your house for months, even years, without paying a hundred on your mortgage? Contact us today.”

These lawyers take actions before the courts that force the banks to prove their mortgage cases.

morality strap

Banks and investment companies actually use a form of strategic default all the time, without the moral leash many homeowners are tied with. Many ethicists raise the issue of morality by reminding consumers that they have an obligation to pay their debts if they have the financial capacity. Other industry professionals believe that there is no moral problem at all; pointing to the essence of the initial contract between two consenting adults: if a borrower defaults on the home, the bank has recourse to repossess the home. Many homeowners who choose strategic default feel that they are simply helping them get by while keeping themselves and their families from financial ruin.

Strategic Default Impact

Some economists and professionals argue that strategic default affects the neighborhood in which the house is located and that it is another foreclosure that lowers property values. Others argue that strategic defaults will impact the industry by making future lending practices more stringent.

Formal investors routinely dump bad investments

Other gurus point to the fact that financial investors often dump bad investments without recourse that have negative equity. A recent article reported that a Wall Street megabank simply defaulted on five of its San Francisco-based commercial buildings after building values ​​plummeted. When companies do this, it is often said to be a bad investment: taking a bad investment off the books; when homeowners do it, it comes under a different label, often peppered with shame.

Various financial gurus are advising their clients to abandon bad real estate investments and start over. Suze Orman, an acclaimed financial expert, has received tons of media (and criticism) because she apparently advocated getting rid of the house and starting over.

Homeowners Property Foot Tax Bill

Many consumers are simply taking the bull by the horns and strategically aiding the default process because they have seen their home values ​​plummet. Adding insult to injury (and perhaps further pushing many homeowners who might not otherwise have considered strategic default), the homeowner is footing the bill for the financial relief (bailout) that, ironically, many of the banks and Mortgage companies have obtained from the government during this foreclosure crisis.

Strategic Default Firms Are Foreclosure Cleanup “Clients”

As organizations are springing up to help homeowners strategically default on their homes, more help will be needed with foreclosure cleanup, and these homeowners will have more funds available to move because they will not have been paying their mortgages. As the owner of a foreclosure cleanup business, you should add this group of organizations to your contact list. These organizations are aware of when a house will go into default. (They will know this even before the loss mitigation departments of the banks and mortgage companies; because, by their very design, they will have strategically engineered the pending default.)

Get your foreclosure cleanup information vs strategic default companies

Make a quick list online, search for terms like “strategic default” or “foreclosure agencies,” to find a list of existing companies and attorneys to help homeowners strategically default. Send them your foreclosure cleanup marketing information, the same way you would send your contact information to the loss mitigation departments of banks and mortgage companies. Many of them have areas on their websites for industry providers. You want to be on those lists. As a foreclosure cleanup company, you can offer to help homeowners with moving and debris removal (furniture, old vehicles, grills, garage debris, tools and equipment, basement/storage items, and more). Eventually the owners will move somewhere, and it will probably be to smaller homes. You’ll want to be first on their list when they’re ready to call service providers.

Also, if a short sale deal is negotiated at any point during the strategic default, your contact information will already be in the default company rolodex as a foreclosure clearance contact for the short sale realtor. It is highly unlikely that your foreclosure cleanup competition will target this lucrative database of prospective clients.

Continued success with your foreclosure cleanup business!