Profile picture for MP413

Short Sale of Strategic Default in FL?

My wife and I bought our house for $235k in 2006, it's now worth under $115k and we want to get out of it.  We had a loan mod done, they lowered the interest and kept the capital.  We don't have a bad hardship right now but soon we'll have our second kid and will have to spend another $800 monthly in daycare so the mortgage will get tight then.  We're current on payments and always have been.

One realtor I talked to said that not being able to have a good savings (we don't) would qualify as a hardship.  We also have some credit card debt.  I don't care about the moral part of the story, I'm thinking what will be best for my family financially in the future.

Oh and my wife is the only person on the mortgage, so I think that may help us.  Any advice on what to do?  I don't even know if it's worth calling the mortgage company again (Nationstar) since it will take forever to get something done.  Thank you for any helpful advice!

  • June 30 2011 - Land O Lakes
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (4)

Profile picture for shasta_steve

Here is your main problem with doing a strategic default and that is that Florida is a recourse state.  If you walk you are going to end up still owing the bank a good deal of money. I guess the best thing about it is it will now by unsecured debt, much like a credit card, and they will be much easier to deal with as far as how much they will take.  They will often to take a very small percentage to settle the debt. 

You may try a short sale but I feel it is very unlikely that they will allow it to happpen because of not having a hardship. They will at the very least want you to sign an agreement to pay back a certain amount of money.  I am sure you will find an agent to list it as apparently a strategic short sale is the "right" thing to do, while a strategic default is immoral.  Lots of people out there think the bank is just going to forget about trying to collect and write off the debt but there is no way that will happen.   At the very least they will sell the debt to a collection agency.

If I were to give you any advice is you need to make your decision fairly soon.  The mortgage debt forgiveness act is set to expire at the end of 2012. It may very will take over 18 months to get the bank to foreclose in Florida.   Forgiven "recourse" mortgage debt after that time may end up being taxable.  I say may because it is possible they may extend the law and if you are "insolvent" at the time the debt is forgiven they they will not charge you any taxes on the forgiven debt up to the amount you are actually insolvent. 

  • June 30 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Navigating a shortsale can be a slippery slope, as many lenders won't even consider if you're not in default.  On the other hand you could get lucky.  I had a BOA client not make a payment for nearly 3 years, and just got his shortsale approved.
Good Luck!

  • June 30 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for MP413

Haha I was thinking the same thing about the savings bit.

We only have one loan.  The prospect of being able to save up our mortgage payments is very attractive towards doing the strategic default.

  • June 30 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Michael Helton
Not having savings qualifies for hardship? wowza

Look, the bottom line is that the only entity who is going to determine whether you may do a shortsale on your property is your lender (Nationstar).

Do you have a 2nd lienholder?  If so, they will be a minor player as well.

You could always walk away and foreclose, but that will trash your credit as bad as a bankruptcy.  A shortsale will still effect your credit but nowhere near as bad as a foreclosure since it counts as a loan modification instead of a loan default.

Now, the issue with you not being on the loan will effect you in the future if you are trying to buy a new home that will take the income of you and your wife.

Good luck.
  • June 30 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.