Michael R. Bang: Justifying Strategic Default

10719_michaelrbang Michael R. Bang: Justifying Strategic Default PERSON OF THE WEEK: You may not expect a book advocating strategic default to be written by the owner of a real estate company that specializes in the purchase and sale of foreclosed properties. But that's the case of Michael R. Bang, CEO of Atlanta-based Georgia Foreclosure Inc. and author of ‘Walk Away – How to Strategically Default on an Underwater Mortgage‘ (published by Fast Pencil Inc.). MortgageOrb spoke with Bang about his unique double career as an advocate for strategic defaults and a specialist in foreclosed properties.

Q: What was the inspiration for ‘Walk Away’?

Bang: Day after day, as I spoke with homeowners who were looking to sell their home due to the loss of a job, an illness or other issues, I witnessed the anxiety, fear and utter sense of hopelessness good people were exhibiting. There was real despair as they continued to believe there were no options available to them.Â

I was moved to write the book to inspire people to understand that they had options, that well-being and happiness are the natural state of human kind. That is why I wrote ‘Walk Away’ to serve as a guide to those who truly seek answers on their ability to take control of their life and gain their power back – even if that means letting go of something like a home that is causing them so much pain.

Q: You are involved in the housing market via your company, Georgia Foreclosure Inc. What kind of reaction to this book have you received from your peers in the housing market?

Bang: The reaction has been somewhat mixed, but overall, very supportive. Initially, many individuals in the housing market segment (agents, mortgage brokers, attorneys, etc.) did not grasp the enormity of the housing crisis. Their initial reaction was rooted in the false premise that individuals losing their homes should never have been approved in the first place, so there was a sense that advocating that they consider the option of walking away from a financial obligation was unfair and would cause a greater dip in the housing market.

However, as this recession – and I would go so far as to say for many, it has hit the level of a depression – has grown year over year, opinions have changed greatly. Home values have dropped significantly, creating a sea of underwater mortgages. Even the wealthy cannot sell their homes because the value is no longer present, and many homeowners who prospered during the boom years and purchased second homes are now seriously looking at letting them go. They simply cannot afford the multiple mortgages and, due to decreasing values, are unable to sell the home.Â

Q: When the housing crisis began, the Internet became overpopulated with many websites offering a variety of solutions and advice to distressed homeowners. In your opinion, were these websites mostly helpful, or did they make a bad situation worse?

Bang: Initially, I think there were good intentions. However, the amount of fraud that we've seen pop up through these ‘loan modification assistance’ websites has caused more damage than good.Â

You see, most consumers are not enlightened about their legal rights as a homeowner, so they seek information on the Internet and often take the information as truth – sometimes it is, and other times, it is just plain wrong. The other issue that complicates matters is that most individuals are afraid of the judicial system. If they really understood our judicial system, they would have a great sense of empowerment and would fight back.Â

Unfortunately, ignorance of the law and consumer rights has allowed many homes to go into foreclosure, when, in fact, the homeowner often can prevail against a lender if he or she would stand up and demand the lender produce the documents and show a right to foreclose.

Q: How would you respond to people who claim that strategic defaulting created an increased volume of problems for the housing market?

Bang: Simply stated, I say there is no basis for that statement. It is my desire that more homeowners look at their house as a business transaction. If your business is in the red, you don't beg, borrow and steal to keep it floating – you close the doors and move on. Why is it that corporations do this daily and no one says they are contributing to a failing economy?Â

Recently, American Airlines chose to go into bankruptcy to wipe out and reorganize their debt as a business decision. Homeowners should be looking at their homes in the same manner.Â

My opinion is that when banks start seeing owners walking away from an underwater home, these lenders and investors are going to take a good, hard look at their policies and figure out programs that will allow individuals to modify their loans and stay in their homes. Until a movement starts and is big enough to begin to affect their bottom line, they have absolutely no incentive to change the way they are doing business and will just keep foreclosing.

Q: What is your prediction for the state of the housing market in 2012? And do you expect to see a greater level of strategic defaults this year?

Bang: I predict we are going to see a greater depreciation in housing values as lenders continue to dump their backlog of homes onto the market and sell them for whatever price they can get. The result of this flood of cheap homes into the marketplace is going to devalue complete neighborhoods, and more people will find they cannot sell their home because they owe more than the home is worth.

I believe that the option of walking away from a home that is under water is becoming a viable option to many homeowners. As consumers begin to realize that staying in a home that is underwater is basically being a "tenant in debt," they gain a sense of ownership of their future and are not afraid to do what is necessary in order to bring a sense of stability back into their lives.

I predict that many people will begin to challenge lenders on foreclosures. They may have a right to do it, but consumers should make lenders do it legally by producing all of the documents to show they have followed the laws themselves and have a legal standing to proceed; often, they have not followed the law and a settlement can be reached that may allow the homeowner to keep their home.

Ultimately, my message in the book is: Here are options you have, know that you have rights and use them. Fight the good fight knowing that you may have to walk away, but know you are in control of your future and that you do have options. Take your power back and be happy again.


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