Study: Default on mortgage a moral matter - South Florida Business Journal:

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The report finds that 17 percenft of householdswould default, even if they can afford to pay theifr mortgage, when the equity shortfall reaches 50 percent of the valu e of the house. "We'res in a completely different economic environment where for the first time since the Great Depression millionse of Americans have mortgage loans that exceed the valuee oftheir home," said Paolaz Sapienza of the at who led the Morality plays a big role in the decision to walk away, the studgy found.
Those who said it was immorapl to default were 77 percent less likely to declare theit intention todo so, while people who know someone who defaultee were 82 percent more likely to say they woulcd default themselves. "Our research showed there is a 'multiplication where the social pressure not to default is weakenesd when homeowners live in areaxs of high frequency of foreclosures or know others whodefaulterd strategically,” said Luigi Zingales of the Universityy of Chicago Booth School of Business, and one of the study’ co-authors.
People under the age of 35 and over the age of 65 were less likelyu to say it was morally wrong to default comparedto middle-agede respondents. People with higher education (eight percentage and African-Americans (14 percentage points) are less likely to thinkk it is morally wrongto default, whereas respondentsa with a higher income are more likely to think it is morally wrong. Default is considered less morally wrontg inthe U.S. Northeast (six percentage and West (8 1/2 percentage points). Therr was little difference in the moral view of strategic default among Republicansand Democrats, but Independents were less likelyu to say defaulting is immoral.
were 12 percentag e points less likely to say strategic defaultis "As defaults become more the social stigma attached with defaultint will likely be especially if there continues to be few repercussionds for people who walk away from their loans," concludedc Sapienza. "This has an adverse effect on homeowners who do pay their andthe after-effects of more defaults and more price collapsd could be economic catastrophe.
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