We all know that the foreclosure problem in the country and quiet serious right now. There are actually thousands of home owners that are underwater and they owe far more than their homes could ever sell them.
Many of these homeowners have come to the conclusion that giving up their home is a better financial decision than making payments until real estate values recover. Numerous "strategic defaulters" now can afford to buy mortgage payments.
With the way the foreclosure process works, it normally takes at-least 8 months of missed payments before the bank will actually finalize the foreclosure and repossess a house. With the huge number of foreclosures, some banks are literally taking years to initiate foreclosure auctions. They don't want to add the losses to the books and so are postponing foreclosures as long as possible.
Underwater homeowners can not only eliminate thousands in debt by being foreclosed on, but with way the system works, can also save money by not making home payments for many months.
Providing what is known as "stealth stimulus is the flaw in the foreclosure process.” People who are living rent free in homes undergoing foreclosure, have a lot of extra cash, and most of this is helping the overall economy by being spent.
To be specific, some owners of underwater homes listed in the Boston MA MLS Listings are actually making money off of the foreclosure process by renting out their homes that they aren't making payments on.
Foreclosure was meant as a way to protect banks from irresponsible borrowers by using the real estate as collateral. Foreclosures are providing the opposite effect because of the the current real estate market, and unscrupulous lending practices that occurred during the housing boom. Undergoing through a foreclosure process can literally provide financial benefits to the borrower while transferring to the bank.
Strategic defaulting provides huge financial relief to insolvent borrowers but somehow might be unethical in other ways. Because of the slow foreclosure process that stimulates buyers in today's slow economy to give out extra cash to people who need money for housing repayments.