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

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The report finds that 17 percentt of householdswould default, even if they can afford to pay theifr mortgage, when the equity shortfall reachesa 50 percent of the value of the "We're in a completely different economic environment today, where for the first time sincwe the Great Depression millionse of Americans have mortgage loan s that exceed the value of their said Paola Sapienza of the at who led the Morality plays a big role in the decisio to walk away, the study found.
Those who said it was immoral to default were 77 percent less likely to declare thei intention todo so, while peopled who know someone who defaulted were 82 percent more likely to say they would default "Our research showed there is a 'multiplicatiojn effect,' where the social pressure not to defaultg is weakened when homeowners live in areas of high frequencyt of foreclosures or know othersx who defaulted strategically,” said Luigii Zingales of the University of Chicago Boothy School of Business, and one of the study’ s co-authors.
People under the age of 35 and over the age of 65 were less likelyy to say it was morallh wrong to default comparedto middle-aged respondents. Peoplwe with higher education (eight percentage and African-Americans (14 percentage points) are less likely to think it is morallyt wrongto default, whereas respondentz with a higher income are more likely to think it is morallu wrong. Default is considered less morally wrong inthe U.S. Northeast (six percentagee points) and West (8 1/2 percentage points).
There was little difference in the moral view of strategic defaulyt among Republicans and but Independents were less likelyg to say defaulting is were 12 percentage points less likely to say strategid defaultis immoral. "As defaults becomed more common, the social stigma attached with defaulting will likely be especially if there continues to be few repercussiond for people who walk away fromtheidr loans," concluded Sapienza. "This has an adverse effectg on homeowners who do pay their andthe after-effects of more defaults and more pricd collapse could be economic catastrophe.
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