COLDWATER (WTVB) - As times get harder, Monarch Community Bank says many people think that walking away from a mortgage is the answer. With the most number of mortgages in Branch County, Monarch says this mindset has certainly hurt business. Monarch provides free credit counseling to customers who are looking into bankruptcy, foreclosure, or just having problems managing money.
Recent media reports describe the increasing tendency of financially stressed homeowners to simply “walk away” from their mortgage, a practice called a “strategic default” whereby the owner simply stops making mortgage payments and forces the bank to foreclose on the property. While turning in the keys and stopping payments to your bank may seem like an easy solution, homeowners should know that strategic defaults can result in costly consequences and can bring a credit score to drop 100 to 400 points, making it difficult to obtain other credit and nearly impossible to get another mortgage for at least three to seven years.
Homeowners considering this solution should also be aware that many states allow banks to pursue the homeowner’s remaining assets such as bank accounts, automobiles or other investments. A strategic default can also have serious tax consequences. Better solutions for homeowners who are having difficulty making mortgage payments include short sales and mortgage modifications.