Strategic Default vs Strategic Short SaleStrategic Defaults in California. People are walking away from their mortgages by the thousands, making a financial decision that it's better to take the hit on their credit score than try to recover thousands of dollars in negative equity. They're called strategic defaults. They risk being sued by the lender for the unpaid mortgage balance on any 2nd liens, HELOC loans, or Refinanced Loans. Their credit will take a huge hit, making it difficult to get a credit card or a car loan for up to 7 years, and they won't be able to get mortgages for 7 years. Under California law, banks may in certain circumstances be able to pursue a defaulting borrower. If a borrower has refinanced their loan, has 2nd or 3rd liens or HELOC loans, they generally may be vulnerable to suit by their bank. Think About the Strategic Short Sale Alternative. Recent changes in California law has made it easier for borrowers to protect themselves from future lawsuits if they complete a short sale. SB 931, which generally states that if a first mortgage lender agrees to allow a homeowner to complete a short sale, the lender will not be able to turn around and later file a lawsuit against that former owner for the difference between the amount owed and the amount the property sold for. SB 458 generally gives the same protection for homeowners with a second or third mortgage lender, refinance lender, or HELOC lender. Want to know more about a strategic short sale and other options for distressed real estate.[self promotion and contact information deleted by Zillow moderator. Please refer to our Good Neighbor Policy for posting guidelines]January 22 2012 - Los Angeles0YesReport a ProblemProblemSelect oneOffensive contentIrrelevant contentSpam (pure self-promotion)OtherDetailsYour emailPlease enter a valid email address.Submit CancelContent flaggedWe 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.