What is strategic foreclosure on a rental property?

Rental property strategic foreclosure is a term which refers to a landlord purposefully letting the mortgage lender foreclosed on the apartment building or rental home. Even though the landlord can afford to pay the mortgage payments, they simply stop paying. The landlord may have different reasons for allowing their property to go into foreclosure. One reason, for example, is that the rental property’s value may have decreased causing the landlord to owe more money than what the property is actually worth. However, a landlord can simply walk away from the rental property letting it go into foreclosure if they can no longer afford the payments, but still can pay too. So instead of seek help such as loss mitigation, selling the property or giving the property back to the mortgage lender (deed in lieu of foreclosure), the landlord lets the foreclosure process complete itself. This means that the mortgage lender files a foreclosure complaint with the local court. Since the landlord doesn’t respond to the complaint with a written response, the judge over the case automatically rules in the lender’s favor. The mortgage lender will complete the foreclosure process by selling the rental property at a public auction or through a private sell.

According to the U.S. News & World Report, home and rental property strategic foreclosure doubled to 588,000 from 2007 to 2008.

Foreclosure is a very difficult process for the renter who has no control over the situation. Thus, it’s important to speak to a real estate lawyer to understand all options available.