Defaulting on Mortgages: A Business Strategy



Defaulting on Mortgage as Business StrategyEver since the housing bubble burst in 2008, we’ve heard story after story of families losing their homes to foreclosure. The reasons are plentiful, from parents losing their jobs to their adjustable rate mortgages ballooning too high.

But a recent article at Money CNN shows that even rich homeowners are facing foreclosure, but they view it as a business strategy.

These rich homeowners bought million dollar homes across the country but their reasons for buying mansions aren’t important. Basically, they are just like any other homeowner who wants to purchase the nicest house in the nicest neighborhood they can afford.

The major difference comes with WHY these rich homeowners are defaulting on their loans and walking away voluntarily from these mansions. Regular people, as mentioned above, have found themselves struggling to make the payments and generally don’t have anywhere else to turn if the bank takes the house in foreclosure.



These are heartbreaking stories, especially if it happens in your community. I have also heard of stories where these people decide to walk away or default earlier since that will be the final result anyway.

But some of the people with mansions are able to afford the payments on their house but decide they will lose less money by defaulting on the loan and heading into foreclosure, especially if they owe more to the bank than the property is worth. So they take their time to pack up and walk away from their mansions into another home.

The question I have is, what happens to their credit rating? Are credit ratings compiled in the same way if you have an income that puts you into the “rich” status? Or maybe it doesn’t matter as much because they have so many other assets?

My heart isn’t bleeding for them because their situation is not as dire as those who are out of work and have no where else to go. But I never considered that people of this status would willingly walk away from their home.

What are your thoughts on this? Is this a strategy you would use, if placed in a similar situation? Leave your thoughts in the comments section below.

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About reibrain

Hey, my name is Trevor and I'm the founder of The REI Brain and editor/contributor. I started investing in real es.tate when I was 21... and love entrepreneurship, the internet, and real estate. My main focus today is growing my companies, systemizing my businesses so I can work less and make more, and spend more time with my family. Learn more about me at trevormauch.com.

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