
The Menace of Strategic Default Form
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People also ask
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What is a strategic delinquency default?
A strategic default is a decision by a borrower to stop repaying a mortgage obligation. 1. The decision is typically made when the market value of a property has fallen below the amount due on the mortgage. Rather than waiting for conditions to change, the mortgage holder walks away from the property and the debt.
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What is the strategic default theory?
Strategic default is the decision to stop making payments on a debt even though the borrower has the funds to make the payments. In order to do this, the borrower needs to a determine that it is in their best financial interest to walk away (rather than continue making payments on a loan that has lost its value).
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Is strategic default illegal?
With a strategic default, depending on your state's laws, you might be liable for a deficiency judgment after a foreclosure. Or, depending on state law, you might be safe from a deficiency judgment. Some states, like California, for example, have anti-deficiency laws.
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What are the consequences of strategic default?
How Long Does the Impact of Strategic Default Last? A strategic default will remain on your credit record for up to seven years. While this won't necessarily prevent you from taking loans or renting, it may make lenders hesitant to give you lines of credit.
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