Real Estate Opportunities

Brace Yourself for the “Borrower’s Revolt of 2010!”

In 1970 young people across America were burning their draft cards. Today, there is a new revolution brewing that millions of families from all stations in life. I call it the “borrower’s revolt.” Like the Boston Tea Party of 200 years ago, sincere, hard-working folks are fed up with being held to rigid rules that the banks won’t follow themselves.

During the last decade especially, lenders had no scruples about lending more than many families could afford or, for that matter, more than the property was worth. The illustrative “loan committee” with all its superior “wisdom” consistently allowed this kind of abuse so that we are now faced with a nationwide mortgage crisis of huge proportions. Interestingly, a fast growing facet of the legal industry is that which goes after lenders for predatory practices.

With millions of American families “under water” with a heavy negative equity, lenders have tried to “solve” the problem by promising mortgage loan modifications. The idea conveyed has been that they will magnanimously reduce interest, stretch terms and even chop off some of the principle. In theory, it would be nice to help families stay in their homes as owners. In reality, most loan modifications don’t solve anything but prolong the agony. Assuming that a loan modification was successfully achieved, it still wouldn’t erase the fact that the huge debt against the home will probably take more than a decade before breaking even. Thus, the unfortunate homeowner still may be forced to short sell his home or suffer foreclosure.

The solution: Mortgage strike! That’s right. The homeowner in this position is better off short selling his home now and moving on with life. This is what I like to call strategic defaulting. With this strategy one’s credit score can conceivably be repaired in 24 months. It simply makes more sense, especially when folks are spending much more on a bad mortgage than on rent of a comparable home.

Jumping on the “bandwagon,” too, is real estate agents who see a way to revive their ailing businesses. If they can get more people to list their home as a short sale they can earn more commissions. Please remember, though, that not all real estate agents are cut from the same cloth. I have seen many be more a part of a problem than a solution. Choose wisely!

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