We Say It Again − Never − Ever − Strategically Default

by Ken Kappel on April 12, 2012

There is no need to Strategically Default, your loan is likely mired in fraud − criminal activity — and you likely do not know it. Here’s a fraud sampler.

Origination Fraud. Fraudulent and forged loan origination documents.

Appraisal Fraud. Appraisers were coerced into inflating value of the home you were considering buying. This is in the public record.

Securitization Fraud. Against all state and county property law the Promissory Note and Mortgage/Deed of Trust were illegally bifurcated − split apart − thus clouding the Title, actually breaking the Chain of Title.

Rating Agency Fraud. Without actually investigating the loans, and pressured by the Wall Street Investment Banks, the major rating agencies declared the Mortgage Backed Securities (MBS) issued by the Wall Street Investment Banks — which included your loan –  were “AAA,” highest grade investment paper. This allowed insurance companies and pension funds to legally buy the Securities. In fact they were not not even Mortgage Backed, because the Promissory Note and the Mortgage/Deed of Trust were illegally separated.

Servicer Fraud. Not recording actual on time payments on a timely basis. Leading to illegal fees and charges, which made the loan look delinquent in order to terrorize borrowers — and then — start foreclosure proceedings. This enabled Loan Servicers to charge even more illegal and fees and charges.

False Inducement Fraud. Telling borrowers to stop making payments in order to obtain a loan modification, which rarely came.

Robo-Signing Fraud. Forging documents and knowingly and illegally filing them with courts as part of the foreclosure process. The courts, when they figure it out, literally call it a “… fraud on this court.

This is a partial list − partial list − there are many more fraudulent violations − many more. Millions of Americans have already lost their homes in last three years, because they did not realize the fraud. You must educate yourself. IF you do, you’ll realize that Strategic Default is a catastrophically bad decision. You have the power due to the basic frauds outlined above. Repeat. Educate yourself. Use our blog and book. Tell us you read them both. Only then can we can offer some “tools” that may guide you to a solution, a process whereby you protect and defend your family and your home. Step to it. This is not legal advice, because we do not and can not offer legal advice. However, due to holding a currently valid California real estate agent license we can, do and are under ethical obligation to offer some legal information? You bet.

In order to educate underwater homeowners and folks with foreclosure issues regarding breaking news related to foreclosure, which also give information to assist underwater homeowners in Confronting Fraudulent Housing Debt; we often carry short data driven articles from DSNews. Carrie Bay wrote the article below. You can read her entire article below, or at her web, it’s title: ” Survey Suggests More Homeowners Are Open to Strategic Default” The link is live.


“An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half of the homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage obligation if falling home values persist.” [Emphasis Added.]

“Five years into the housing downturn, and Housing Predictor found that 47 percent of those surveyed would intentionally stop making their mortgage payments even if they could afford to in order to get out from under the sinking investment of home-sweet-home.” [Emphasis Added.]

“The number of mortgage borrowers open to strategic default has risen sharply since Housing Predictor last surveyed public opinion on the issue roughly a year-and-a-half ago. In October 2010, 36 percent of homeowners participating in the poll said they would throw in the towel should housing prices continue to drop.”

“Housing Predictor says the foreclosure crisis, falling home prices, and lingering doubts that the value of homes will increase over most homeowners’ lifetimes are contributing to the increase in mortgage holders who say they will walk away.”

“Housing Predictor’s results are based on responses provided by 1,000 visitors to the company’s website.”

“A recent study commissioned by the Mortgage Bankers Association called attention to the fact that the vast amount of media coverage dedicated to the financial crisis and the persistent woes of the housing market has made homeowners take note of their equity position.”

“For those who owe a great deal more on the mortgage than the home is now worth, the idea of simply walking away before the situation worsens has its allure. A market report issued by Moody’s Analytics last July warned of the growing risk of strategic default among loans that have always performed, meaning the borrower has remained current since taking out the loan.”

“Moody’s analysts explained that as home prices fell over the previous year, the loan-to-value ratios (LTVs) of these always-performing loans began to approach, and in many cases surpass, average LTVs for loans that have defaulted since 2009. They point out that this is a departure from what they’d seen up until the middle of 2010, during which LTVs for always-performing loans had stayed flat or even decreased slightly.”

“Back in July, Moody’s analysts identified between 12 percent and 24 percent (depending on the asset type) of always-performing loans with LTVs that were higher and had risen more steeply than those of defaulted loans.”

“Rapid rates of LTV increases may themselves be a factor in a borrower’s decision to strategically default, since they may quickly erode any remaining confidence in borrowers that they could ever restore positive equity in their property,” Moody’s said in its report.”

“FICO estimates strategic defaults to be more than a $20 billion problem annually.”


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