Thursday, December 3, 2009

Why can't homeowners walk away from under-water mortgages?

Because they carry too much emotional baggage to make rational decisions:
1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to induce homeowners to ignore market and legal norms under which strategic default might not only be a viable option, but also the wisest financial decision.

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