Frequently Asked Questions:
1. What is a Strategic Default?
A Strategic Default is when a borrower decides to stop paying a mortgage even though they may still be able to afford the payment. When the value of a property has fallen far below the mortgage debt and recovery of the equity lost is expected to take years, a borrower may elect to default based on the mortgage contract. When a homeowner strategically defaults on their home, they are following the mortgage contract that states that in the event of default or non-payment of a mortgage loan, the home shall serve as collateral and the lender has the right to sell the property to get back the borrowed money. Going deeper into debt to pay for a home with negative equity may be financially unwise. A Strategic Defaulting homeowner will use the law to their advantage, by strategically and legally securing for themselves a more favorable financial position.
2. What is the difference between a Strategic Default and just walking away?
Homeowners who can afford to make their mortgage payment, but choose to stop paying are strategically defaulting. Strategic defaulters have calculated the risks, the time they will take to recover from a foreclosure, and the long-term financial benefits of letting go of the bad investment.
Homeowners who walk away from their property cannot afford to continue making mortgage payments. These homeowners are experiencing significant hardship in keeping up with their overpriced mortgage payment month after month. These hardship cases can be contributed to predatory lending practices which set the borrower up with an unreasonable exploding ARM, the faltering market and economy, loss of employment, or the big banks refusing to modify loans. Homeowners who chose to walk away have said, “Enough is enough!” By walking away from their underwater property, these homeowners are able to take significant steps toward financial freedom.
3. Can I do this on my own, without paying?
Since 2007, YouWalkAway.com has helped thousands of members prepare and strategically navigate through the foreclosure process. Foreclosure can be done alone, but it can be a scary, unpredictable and risky endeavor. Our goal at YouWalkAway.com is to empower homeowners through the foreclosure procedure by providing foreclosure advice, tools, resources, ongoing support and peace of mind to answer all your foreclosure questions. Sometimes seeking the guidance of an expert is the best thing you can do – even though you can do it on your own, doesn’t mean you should.
4. How will the Strategic Default Protection Kit help me?
If you are considering a Strategic Default, this State-Specific Protection Kit will let you know how you can live in your house for up to 8 months or possibly more mortgage and rent free, stop the harassing collection calls from your lender and take steps to avoid bankruptcy and improve your credit. The Strategic Default Protection Kits provides a step-by-step description of the foreclosure process and easy to understand explanations of all the states laws pertaining to your foreclosure and answers to your foreclosure questions. The Strategic Default Protection Kits includes a Fair Debt Collection Practices Act “Do Not Call” Letter to stop your lender from harassing you and your family and a Letter to a Prospective Landlord to help rent a home after the foreclosure procedure is finished. You will also find information and foreclosure advice regarding how to make sure your lender follows the law. They must follow strict legal procedures. If the lender does not follow the law entirely, you may have a case against them. Included in the kit is a Credit Scenario report to help show you how to understand your credit score, offsetting the damage of a foreclosure and beneficial information to potentially avoid Bankruptcy.
5. If I Strategically Default, will I owe any money to my lender?
Whether or not a borrower will owe the lender money following the conclusion of the foreclosure procedure is dependent on the state in which the property was located, the way the loans were created, and the types of mortgage loans. The YouWalkAway.com Strategic Default Protection Kit was designed to explain and simplify the laws so you know what to expect. There are presently 8 states in the US that have laws, which bar the lender by law from coming after the borrower for a deficiency judgment.
6. Do I have to file bankruptcy?
It is not necessary to file bankruptcy. On course with a strategic default and in an attempt to preserve one’s credit score, if a borrower is not making the mortgage payments they can attempt to keep all other lines of credit current.
7. I am in the military, are there any special rights or laws that protect me from foreclosure?
Please follow this link to a list of military FAQ’s and information on our Military Home Preservation Protection Plan & Kit
8. Should I hire an attorney?
Hiring an attorney to assist you through the foreclosure process is not necessary. As part of the service You Walk Away offers, our members have access to Attorneys licensed in their state to answer specific foreclosure questions. This Attorney Network is beneficial for many of our clients, as they are able to discuss the legal and tax implications of a strategic default and provide foreclosure advice. YouWalkAway.com will be available to answer any questions you have during the entire foreclosure process. There are certain circumstances when an attorney is needed, however, hiring an attorney can be expensive with retainers and high hourly fees. Attorneys have collaborated with us to write the Strategic Default Protection Kit to ensure it contains the information an attorney would provide. This alone can save you thousands of dollars.
Banks and Lenders now typically like to see 5-7 years since the foreclosure was discharged. However, some government loan agencies currently require only 3 years. Depending upon the down payment, there may also be programs available that require only 1-2 years after a foreclosure. Also you may visit www.AfterForeclosure.com
10. How long will a foreclosure last on my credit?
Lenders usually look back 7.5 years when determining whether or not to loan. The Foreclosure can remain on your credit report for seven years but the effects will diminish each year. Following the close of the foreclosure procedure, YouWalkAway.com can refer you to a credit optimization firm who has legally and legitimately removed foreclosures from member’s credit scores. However, removal of a foreclosure can never be guaranteed.
11. What is the cost of the memberships?
To best accommodate our members, YouWalkAway.com has developed three membership levels.
Our most affordable Membership plan is the Silver Membership. The Silver Membership is a reliable resource at a $199.00 enrollment fee and $29.95 per month. To learn more about the Silver Membership, click here.
The Gold Membership is a cost-effective resource for borrowers looking for guidance through the strategic default process and answers to specific foreclosure questions. With a $295.00 enrollment fee and $49.95 monthly, Gold Membership will provide access to all the information available in the Silver Membership with the added ability to connect with knowledgeable experts in the industry. To learn more about the Gold Membership, click here.
The exclusive Platinum Membership creates a personalized plan for our members. For a $395.00 enrollment fee and $99.95 monthly, the Platinum Membership provides unlimited support and individual attention to your strategic default, personal foreclosure advice; as well as the benefits available to both the Silver and Gold Members. To learn more about the Platinum Membership, click here.
12. Can I join if I have an Investment property?
Yes. YouWalkAway.com has helped many investors and homeowners who have strategically defaulted on a second home.
13. Do you buy my home from me?
No, You Walk Away, LLC is not a real estate company, broker or private investor. Any company that encourages a homeowner to quick deed a property to them should be examined in order to ensure it is legitimate and not a scam. Attempting a short sale may delay the foreclosure process. If you would like to sell your home, You Walk Away, LLC can refer you to one of our expert short sale affiliates.
14. It sounds too good to be true, how do I know this isn’t a scam?
While there are many scams out there dealing with foreclosure, this is not one of them. We do not buy your home, we do not have you sign over your property to us. We provide a service, answers to foreclosure questions and legal information. The service is to help you fully understand how the law pertains to your particular situation. Once your home has gone into foreclosure, your default becomes public record and you will receive a bombardment of advertisements to save your home and avoid foreclosure. Beware of companies that claim they can cancel your mortgage all together or stop the foreclosure procedure indefinitely. Please click here to see our Press Page.
Foreclosure rescue scams are deals that proclaim to “save your house” or “pay your mortgage.” Don’t be fooled. In one foreclosure scam scenario, you – the homeowner – surrender the title to your house thinking you’ll become a renter and buy the house back over a few years. In most of these situations the homeowner will lose their home, won’t be able to buy it back, are still under the obligation of the mortgage loan, and the scam artists walk away with the deed to the property. Sometimes homeowners just sign a bunch of documents, not even realizing they’ve signed over ownership of the house. See our “Walk Away From Scams” page for more details on how to protect yourself.
15. Are there options other than foreclosure?
A Short Sale, Deed in Lieu of Foreclosure, and Loan Modification are examples of standard “work out” options, which describes options a borrower might pursue to avoid foreclosure. Lenders will often extend these types of “work-out” option to everyone, but this does not mean that a borrower is automatically approved for it. In pursuing a “work out” option, the lender will ask a borrower to provide a full financial package i.e. pay stubs, tax returns, bank statements, etc. in order to see if they can approve the borrower for anything. Applying for these types of options is similar to applying for a loan.
16. What is a Short Sale?
A Short Sale is when a homeowner sells a property for an amount less than what is owed to the lender. Whether or not the short sale of the property is approved is determined by the lender and takes into account the buyer’s offer. In pursuing a short sale, a lender will typically request a full financial package i.e. pay stubs, tax returns, bank statements, etc. It is similar to qualifying for a mortgage. A Short Sale could be less detrimental to a borrower’s credit report. Instead of stating Foreclosure, the credit report could read something similar to: Lender settled for less than owed. Occasionally attempting a Short Sale could slow the foreclosure process if attempted after the first foreclosure notice has been recorded. Conversely, a buyer might make an immediate offer that is quickly approved by the lender, expediting the process. You Walk Away is working with an affiliate Short Sale Company who assists borrowers who have chosen to pursue this option. If you are interested in this option please visit ShhortSale.com or simply click on the Short Sale button on our home page.
17. Does a Short Sale affect my credit the same as a Foreclosure?
Even Credit Professionals cannot predict the exact hit one will take in a credit score. With a foreclosure or a Short Sale the range can be extensive based on a borrower’s other lines of credit. On course with a strategic default and an attempt to preserve one’s credit score, if a borrower is not making the mortgage payments they can attempt to keep all other lines of credit current. The majority of the problems with one’s credit score are in the reported missed payments. In the end result, a strategically defaulted borrower’ credit report could read “foreclosure,” in the case of a foreclosure. Alternatively the credit report could read, “debt settled for less than owed ” or “debt satisfied for less than full amount” in the case of a Short Sale.
18. What is the difference between a Short Sale and Foreclosure in terms of tax liability?
The tax liability on a short sale is the same as a foreclosure. If the difference between what is owed and what the house sells for is charged off by the bank and the borrower is not protected under the Mortgage Forgiveness Debt Relief Act, the borrower could be held liable for federal and state taxes. The Mortgage Forgiveness Debt Relief Act is summarized in the YouWalkAway.com Strategic Default Protection Kit. This Act forgives the federal tax responsibility for the difference between what is owed and the amount the foreclosed home is sold at auction. This law was created to protect homeowners who are foreclosing on principal residences only and who have never refinanced by pulling out a home equity line of credit. Certain YouWalkAway.com Memberships provide access to schedule a consultation with a CPA, to assist in determining whether or not you would be liable for any taxes next year.
19. What is a Deed in Lieu of Foreclosure?
A Deed in Lieu of Foreclosure (commonly referred to as simply a Deed in Lieu) is when the lender accepts a deed of the property from a borrower to satisfy a defaulted loan and thus avoids the delay and costs of the foreclosure process. Completing a Deed in Lieu would allow a borrower to walk away from a property without a foreclosure on the borrower’s credit report. Later when the borrower is preparing to purchase a new home, he will not have to check the box that says, “Foreclosure in the last 7 years.” Advantages to a lender include a reduction in the time and cost of a foreclosure. Typically, Deeds in Lieu have not been approved by lenders if the borrower can afford to make payments; if the borrower has not listed the property for sale; if the value of the home is substantially less than the amount owed; if there are outstanding liens on the property (such as second mortgages, judgments from creditors, or tax liens); or if the borrower is in the process of declaring bankruptcy. Ultimately a lender can choose not to accept a Deed in Lieu for any reason, or no reason at all. The decision is entirely up to the lender. Each lender has different policies for Deed in Lieus and the discretion to accept/deny is entirely up to their discretion.
20. What is a Loan Modification?
A loan modification is a procedure in which a loan’s terms, such as the interest rate, monthly payment, or terms are altered with the approval of a lender. Typically loan modifications will reduce the interest rate of the loan; consequently reducing the monthly payments. Principal reductions are very rare. The decision to modify a loan is the lenders. Though there is constant media buzz regarding government involvement or encouragement to modify loans, it is not mandatory for the lenders agreement (unless the loan is government subsidized). For a lender to agree to a loan modification, they would have to be willing to take a loss on the existing loan in exchange for avoiding the expenses of a foreclosure.
21. Can YouWalkAway.com help with a Loan Modification?
Yes, the “Legal Assist” Modification Kit offers a comprehensive loan modification kit. The Legal Assist kit is loaded with resources, tips, and inside information a borrower needs to know to negotiate a loan modification themselves. The kit also offers a step by step guide, suggestions for dealing with your lender, a checklist of items lenders need, sample hardship letters and an explanation of what to do if a foreclosure has been initiated. If you are interested in this option please click here to learn more.