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CALL 559-320-7029 TO ANSWER ALL YOUR BANKRUPTCY ISSUES. Fresno Bee: Many Valley Homeowners Abandoning Mortgages The Fresno Bee had a nice feature article on May 8 entitled More Valley homeowners abandon mortgages. I commented on the morality of strategically defaulting here, but this Fresno Bee article addresses more of the practical issues involved and the author seems to do a good job of answering all of the common questions. One question answered is the hit on one’s credit score from a foreclosure. This is what the article said on that: Like any foreclosure, a strategic default leaves a scar on a borrower’s credit history. Credit counselor Dees — whose housing counseling program is underwritten by an assortment of federal grants and grants from banking organizations and other industries — said many of his clients are frustrated after their bank has denied a plea for help, especially after so much news about bank bailouts and government programs to modify loans. “One of the first things we explain is that you’re not hurting the bank by walking away,” Dees said. “You’re only putting yourself in a worse situation.” While still a red flag, either a short sale — in which a bank agrees to let the owner sell the home for less than the balance owed — or a deed in lieu of foreclosure “look more favorable on a credit report,” Dees said. “It’s much better to work with the lender to get it sold the right way.” Maddux and White suggest that the effects of foreclosure are overblown. “The perception is grossly misrepresented,” said Maddux. “The damage isn’t as bad as people think — it’s about 100 [to 125] points on a credit score.” White said most people “can expect to recover from the negative impact of foreclosure on their credit score within a few years.” By renting for far less, they can apply the rest of their mortgage payment to get ahead on other bills, he said. With the number of people defaulting, I had assumed the credit impact could not be that bad, but I had not yet seen someone take a guess as to what the average hit was.