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Strategic Default in Irvine

Maybe It's Time to Walk Away from Your Mortgage

Suppose you invested money in the stock market and invested in a company at $50 a share. You were hoping to see the stock increase in value, but after a period of time, you watch it begin to decline. At what point do you decide that it is time to sell and limit your losses? In most situations, a prudent investor will decide to sell the stock before it drops too far, in order to limit his or her losses and move on to other investments.

The same is true of real estate. While purchasing a home is often a transaction that is overladen with emotion and dreams of providing a place for your family to build a stable life, it is still fundamentally an investment. Like other investments, real estate purchases sometimes go sour.

This is exactly what has happened to more than a quarter of homeowners in the United States. Millions of individuals and families across America are paying large amounts of money for home mortgages which are "underwater," which is to say that they owe more on the mortgage than the property is worth on the real estate market. Not only are they stuck with a large mortgage payment which is out of proportion to the value of the property, but many years may pass before they will begin to accumulate any equity.

This is especially common in California, where nearly one out of three homeowners have an upside-down mortgage. While a large percentage of these homeowners are dedicated to keeping their homes if at all possible, many are simply fed up with watching a large portion of their income be absorbed by an excessive expense mortgage payment which will not provide them with any return on investment in the foreseeable future.

Strategic Default Explained

A recent survey conducted by JZ Analytics found that 32 percent of American adults would be comfortable with the idea of carrying out a strategic default. This course of action is commonly referred to as a walkaway because it involves giving up on the mortgage and moving on. It is also called jingle mail-in allusion to the image of mailing the house keys to the bank as a way of surrendering possession.

Whatever you choose to call it, a strategic default may be the best option for you. It will not prevent a foreclosure, but it may allow you to remain in the house for several months while the bank prepares to carry out the foreclosure. During this period, you can use the money you would normally use for your mortgage to pay off other debts and to prepare for your move.

Since California is a "no-recourse" state, the bank will not be able to sue you for the deficiency on the loan after foreclosing, so you will not have to worry about being held liable for the remaining loan balance. Strategic default is not a way to prevent foreclosure, but for many people, it is the best available solution for limiting their financial losses and moving on from a mortgage that is more costly than it is worth.

To learn whether this is the best option, contact Peter Rasla & Associates, P.L.C. now for a consultation with an Irvine attorney that is adept in bankruptcy and other debt solutions.

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