Hi Foreclosure Cleanup Business Owners & Industry Colleagues,
Strategic Default: Homeowners Walking Away from Mortgages and How Your Foreclosure Cleanup Company Can Help and Profit
Homeowners Walking Away from Mortgages with Formal Help from Strategic Default Companies
An increasing number of homeowners are walking away from their homes using a formal process called strategic default. They are lining things up before they get behind on their payments. These homeowners are actually using formal companies to help them get their ducks in a row before they start the process of giving up their homes so they are better situated when the foreclosure finally happens. These companies are designed to help homeowners use the law to their advantage so they can get back on their feet financially. As a foreclosure cleanup business owner, you can grow your company by aligning your enterprise with these organizations.
Foreclosure Numbers Astounding
The foreclosure crisis seems still in its infancy when you read some of the numbers circulating. According to a survey by LPS Applied Analytics, before actually getting evicted, the average borrower will have already been delinquent going on 15 months -- 438 days. Further, an astounding 650,000 households have gone a year and a half without paying their mortgages (figure calculated early 2010).
What is Strategic Default?
What is a strategic default? According to Wikipedia.org, an online "about" type website that gives the definition, history and gist of about pretty much anything imaginable, strategic default is a decision to indefinitely halt payments on a debt, despite having the financial capacity to actually make the payments. But the term is also being used to describe homeowners who do NOT have the ability to pay their mortgages. These are people who are allowing this system to give them financial footing so they can catch up, pay other bills, put food on the table, and survive in an economy rote with declining investments, layoffs and permanent job losses.
"Homemade" Mortgage Modifications
According to an article in the New York Times, "homemade mortgage modifications" reduce mortgage payments all the way down to zero. Companies like YouWalkAway.com are strategic default companies. Some call themselves foreclosure agencies and their objectives are to empower the homeowner so they can regain control of their finances. They educate the homeowner and provide them with the resources, support and tools needed as they prepare to go through the foreclosure process. Usually homeowners can live rent free for eight months or more.
Some attorneys are even on the strategic default bandwagon, sending out form letters using similar verbiage:
"Want to keep living in your home for months, even years, without paying a cent towards your mortgage? Contact us today."
These attorneys bring actions to court that force the banks to prove their mortgage cases.
Banks and investment companies actually use a form of strategic default all time, without the morality strap with which many homeowners are laced. Many ethicists raise the morality issue reminding consumers that they have an obligation to make good on debts if they are financially able. Other industry professionals believe there is no moral issue at all; pointing out the essence of the initial contract made between two consenting adults: if a borrower stops making payments on the home, the bank has recourse in taking the home back. Many homeowners who choose strategic default feel they are simply helping he process along while keeping themselves and their families from financial ruin.
Impact of Strategic Default
Some economists and professionals argue that strategic default impacts the neighborhood in which the home stands in that it's another foreclosure dragging property values down. Others argue that strategic defaults will impact the industry by making future lending practices stricter.
Formal Investors Routinely Dump Bad Investments
Others gurus point out the fact that financial investors quite often dump bad, no-recourse investments that have negative equity. A recent article reported that a mega Wall Street bank simply stopped paying on five of their San Francisco-based commercial buildings after the values of the buildings plummeted. When companies do this, it's often referred to as ditching a bad investment -- getting a bad investment off the books; when homeowners do it, it comes under a different label, often peppered with shame.
Several financial gurus are actually advising their clients to ditch the bad real estate investments and start over. Suze Orman, an acclaimed financial expert, has gotten tons of media (and flack) because she apparently advocated ditching the house and starting over.
Homeowners Footing Tax Bill
Many consumers are simply taking the bull by the horn and helping the default process along, strategically, because they've seen their home values drop drastically. To add insult to injury (and to perhaps further push many homeowners who may not have otherwise considered strategic default), the homeowner is footing the bill for the financial relief (bailout) that many of the banks and mortgage companies, ironically, have gotten from the government while in this foreclosure crisis.
Strategic Default Companies are Foreclosure Cleanup "Clients"
Since there are organizations cropping up to help homeowners strategically default on their homes, more foreclosure cleanup help will be needed, and these homeowners will have more funds available to move items out because they will not have been paying their mortgages. As a foreclosure cleanup business owner, you should add this group of organizations to your contact list. These organizations are privy to the timing of when a home will go into default. (They will know even before the loss mitigation departments of banks and mortgage companies; because, by their very design, they will have strategically designed the pending default.)
Get Your Foreclosure Cleanup Info in Front of Strategic Default Companies
Do a quick list online, searching terms like "strategic default" or "foreclosure agencies," to find a list of companies and attorneys in existence to help homeowners strategically default. Send them your foreclosure cleanup marketing info, much in the same way you would send loss mitigation departments of banks and mortgage companies your contact info. Many of them have areas on their websites for industry vendors. You want to be on those lists. As a foreclosure cleanup business you can offer to assist homeowners with move-out and debris removal (furniture, old vehicles, grills, garage debris, tools and equipment, basement/storage items, and more). Eventually, homeowners will be moving somewhere, and it will likely be to smaller quarters. You will want to be first on their list when they get ready to call service providers.
Further, if a short sale deal is negotiated at some point during the strategic default, your contact information will already be in the default company's rolodex as a foreclosure cleanup contact for the short sale realtor. It's highly unlikely your foreclosure cleanup competition is targeting this lucrative database of future clients.
Continued success with your foreclosure cleanup business!
Cassandra Black is the Author of Property Preservation & Real Estate Contracting & Subcontracting Directory, How to Start a Foreclosure Cleanup Business: FREE Articles & Advice Blog,
How to Start a Foreclosure Cleanup Business, How to Register Your Business with HUD & Other Government Contracting Agencies: One-Stop Resource to Locate Government Contracts, Pricing Guide for Foreclosure Cleaning & Real-Estate Service Businesses, How to Market Your Foreclosure Cleanup Business, the
Foreclosure Cleanup Business Combo Estimate & Contract Form, (and other cleanup business forms) and the Housing Authority Master Contacts List with Bonus Search Tool. Cassandra is also the CEO of Foreclosure Cleanup, LLC, Real Estate Cleanup, Atlanta, GA, and an Investor & Landlord (TheCassandraGroup RE
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Visit this link to see which banks closed in which month. (Remember, the acquiring institutions of failed banks can be fertile ground for foreclosure cleanup businesses.)
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Yard Maintenance and Snow Removal
Here's a quick tidbit on HUD's requirements for lawn care on HUD homes. More details available, but this is a tidbit so you have an idea. (Excerpt from Pricing Guide.)
Lawn cutting (initial and subsequent cuts) includes mowing the lawn, weeding, edge trimming, sweeping of all paved areas (sidewalks, driveways, patios, etc.), and removal of all lawn clippings, related cuttings, and incidental debris (newspapers, flyers, bottles, etc.). These services are included in the cost allowable for an initial cut and subsequent cut (re-cut).
The disposal of all clippings and incidental debris should be in compliance with jurisdictional requirements. The costs allowable for trimming shrubs and snow removal are listed separately in the accompanying schedule.
Before and after photographs are required for all cuts. All photographs should be dated.
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