In the past, if you defaulted on a mortgage thru bankruptcy or foreclosure, you could count on a major hit on you FICO score and a wait of about 4 years before you could think about buying another home.
For some people today, the thought of paying a mortgage that is worth more than their home value has them thinking about a strategic foreclosure, just to get out from the debt. After all, it's pretty appealing to think that if you owe $300,000 on a home and it's only worth about $200,000, you could walk away, take a hit to your FICO score, save $100,000 in debt payments, and than buy another home in about 4 years.
But, the picture may be changing. The industry is considering changes that may double the time people would have to wait for a "strategic" foreclosure of this type. New rules could soon be in place that would make these people wait 8 years, pay higher rates, and be required to pay higher down payments.
For the folks that lost their homes due to layoffs, or some other unforseen economic hardship, such as a huge medical bill, they old rule would still apply. What is unclear, is how they would handle the situations, where the borrower got in over their head with too much borrowed on a adjustable rate mortgage and then lost it all when rates went higher. Time will tell.... I'll keep you posted.
If you have questions, let me know. John Graham at Neighborly Financial. www.NeighborlyFinancialMortgage.com