[quote=CA renter] And now, the govt is painting them as “victims” so they don’t even have to feel guilty for walking away.
[/quote]
Actually, it’s the opposite.
People are acting against their own economic self-interest by continuing to pay off houses where they may not have any equity for decades,” he said. “They’re throwing away good money after bad.”
Shame, guilt and fear stop many homeowners from reneging on their mortgages, he said. The government and big banks actively cultivate those emotional constraints because the economic consequences of a large-scale walkaway phenomenon could be dire, he said.
Strategic defaults have widespread repercussions. Ongoing foreclosures destabilize the housing market because the homes are sold at bargain prices. They also undermine the entire economy because banks must eat huge losses and homeowners rein in spending as their own homes lose value. Empty homes hurt neighborhoods and attract blight. And walkaways may inspire copycats – people who’ve seen their neighbors deliberately default feel more emboldened to do so themselves.
California is a nonrecourse state, where lenders cannot pursue homeowners for the unpaid balance on their first mortgage.
