A homeowner purchases a home for their primary residence, and they finance it with a mortgage. The normal course of events result in the prompt remittance of all mortgage payments until the owner sells the home or pays the final payment and gets the deed.
That ???normal course of events??? isn???t always the way it goes unfortunately. In fact, the housing price and mortgage crash that began in 2006 resulted in a very clear illustration of what happens when those payments do not get made on time. Homeowners were defaulting right and left, and banks were struggling to ramp up their foreclosure operations. Foreclosure is pretty simple in theory, even if a bit complex in process. If you don???t pay your mortgage on time and fall far enough behind, you lose your home to foreclosure.
Just as damaging to many homeowners was the corresponding crash in home prices and values. Especially for those who made low or no down payment purchases, they found that their home values were crashing below the amount they owed on their mortgages. It???s called going ???underwater??? on the mortgage. Suddenly, especially when there were home equity loans or second mortgages, they may owe very much more on their home than its value. There seemed to be no end in sight, and a lot of despair.
Many of these underwater homeowners were still employed and very capable of making their mortgage payments, but they simply hated the fact that their equity had disappeared and they wer far in the hole. They saw little chance ever seeing daylight.
A significant number of these borrowers took the ???jingle mail??? approach. They simply dropped their keys into an envelope and mailed them to the bank. They could afford to keep their homes but didn???t want to. Called Strategic Foreclosure, it was done more than you might think. Toward the end of 2013, banks began to look back at those and take whatever action they could to recoup losses.
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