Strategic Default, Strategic Default Mortgage

A strategic default on a mortgage is the decision by a homeowner to stop making mortgage payments (to default) on their mortgage despite having the financial ability to make the payments. Somewhere around one in three mortgage defaults these days is strategic.

Strategic default usually occurs after a substantial drop in the home's price when the debt owed is much greater than the value of the property, meaning negative equity or underwater, and the value of the home is expected to remain low for the foreseeable future.

If you're thinking about skipping out on your mortgage, here's what you need to keep in mind:

• The foreclosure process varies by lender. Don't count on other people's experiences to predict your own.
• Massachusetts is a recourse state and allows the lawsuits by the lender. Before you stop paying your mortgage, be sure you are familiar with the credit and real-estate laws in Massachusetts as well as industry practices.
• Understand what a foreclosure does to your credit.

Massachusetts Is a Recourse State and allows recourse on a short sale or foreclosure.

In Massachusetts you could face lawsuits from lenders over debts that remain after short sale or foreclosure.

Recourse basically means that the mortgage holder can come after you if your house sold at auction or through a short sale for less than the amount owed the lender. If you borrowed $350,000 to buy your home and it sold at auction for $200,000, than $150,000 is still owed to the lender. The lender has recourse against you for that amount.

Also, remember that you may be liable for taxes on the outstanding balance.