Fort Gratiot, MI

We saw this coming a mile away....socially acceptable "strategic defaults." For purposes of my blog I am suggesting that "strategic default" means a homeowner that can make his or her payments but chooses not to for one reason or another. (Note: this excludes legitimate hardships like job loss or health issues for example)

Many owners think, "I'll walk away, my credit will get dinged up a bit, I will keep my credit clean and be able to buy again in a few years". But we should look at the real long term affects of default.

First, how long will it be before the borrower can buy again? The numbers change depending on who you ask and when, but a common response is 5 to 7 years from date of default to get any kind of respectable mortgage loan. Unfortunately (or fortunately depending on your view of things) it could be much longer for some opting for strategic default.

Why might some buyers have to wait 10 years or more to reenter the market? One reason is many borrowers are forgetting about the ticking time bomb that maybe awaiting them...the "deficiency" collection. The deficiency is the difference between what is owed on the note and what the house sells for at the foreclosure sale (different from state to state but I am referring to Michigan).

In Michigan, lenders have up to 6 years to purse a deficiency judgment against the borrower. Keeping this in mind, do think lenders are going to purse borrowers now, while the economy is in the crapper? Or do you think they will wait a few years until the borrower gets back on his feet, when he is making and saving some money for a home down payment. The last lender I spoke with about deficiencies said "we don't even have time to go after people now...we're too busy foreclosing, but we're not concerned about it because we have six years to go after them." Six years! Ones financial outlook can change a lot in six years. And it's not the bank that will be going after these borrowers; it'll be Collection Agencies that bought the loan deficiency rights at 10 cents on the dollar. My guess is they will be ruthless and efficient...nothing like today's loss mitigation departments.

So just when the defaulting borrower thinks he is re-establishing himself and the wife starts to dream about a new home...BAM! The collection calls and wage garnishments will start. Now what? My guess is the borrower will either have to file bankruptcy, thus starting the credit rebuilding process all over again...prolonging the rekindled dream of homeownership another 5-7 years. Or, option B, he will reluctantly make payments to settle the old and forgotten debt he walked away from. Either option likely will be a major financial setback.

I guess the moral of the story is if you're planning a strategic default...you might need to sleep with one eye open. Before walking away, consult your lender, an ethical attorney and trusted real estate professional. There may be a more suitable option. The loan may be modified, or a short sale may be in order. We can in many cases address the deficiency during a short sale so there is closure at the end of transaction.

For more information on deficiencies and short sales, email or call Marc Reno at mreno@bauerreno.com or 810-966-1200 or 810-650-2856.

Marc Reno, Associate Broker, CDPE

**This blog for informational and entertainment purposes, I am not an attorney and am not qualified to give legal advice.

The country life we enjoy outside of Avoca, Michigan has morning chores I have chosen to do. We have horses that need to be feed and watered every morning in the winter months. There is also a small flock of chickens to be taken care of. Each of these animals reward us in there own way.
The chickens help make the compost for me by keeping the pile stirred and a supply fresh eggs to eat.

The horses are a joy to watch them interact and fun to ride. In the Summer time we always have a big garden.

The choices we make come with daily chores . As Realtors active with an online community we have chosen to keep in touch with our own group. There has been an acceptance of an obligation take place. I am committing to write often and with hopefully interesting content.

The list of "Chores" that a Realtor must do every day contains mostly phone work. Client contact and follow up is our business. The warm market is always preferred for us. The only way to keep the sales funnel full of warm leads to to continually reach out, seeking to touch as many potential clients as possible. This opportunity to put my thoughts out there in a post is really incredible. The extension of reach out into the community and the opportunity for me to learn the skill of writing are two things that I am very grateful for.

I hope to use this to attract readers in the Thumb of Michigan to the educational side of real estate. The beautiful country side of St. Clair County has been divided into small farm size parcels that are just the right size to raise a few animals on and grow a garden to supply fresh healthy food. We love our small farm and hope to help others to build the same thing, we know that moving to the country is more than just buying a house, it is a lifestyle. That is what some of this blog will be about, the small farm lifestyle. My Dad raised a country boy, I will have stories to share.



This is Wishing you all a Very Merry Christmas form a small country family living in the southern thumb of Michigan. May Santa bring you most of what you wish for and a Joyous New Year filled with the opportunity to earn the rest.

If you do business in St. Clair County you might want to check out the Fort Gratiot Business Association!

MISSION: To promote and sustain the economic growth of local businesses and the quality of our community.

VISION:The Fort Gratiot Business Association was organized to promote our local businesses and community and to present a unified voice on important issues that affects the success of Fort Gratiot.