Viral Nature of Walking Away

[briansd1]

I think that consumers are more stupid than we give them credit for.

There is so much abuse in the lending industry that it’s unbelievable. That’s why I support a strong consumer protection agency.

Nobody in their right minds would borrow $500 to buy a TV or a washer. They should save for that.

All consumers hear are the come-ons such as “no payments for 1 year” and “$16 per month”.

Abusive loans should be banned. Period. If that means less credit, all the better. People should drive old cars and watch 20 inch TVs if they don’t have the discipline to save.

And they should rent, not buy.

[Arraya]

http://api.ning.com:80/files/CdXtKqMgxHL4M8EYE8FhdO8KVYCEx0nMLUYAjpPIbVo_/walking_away_paper.pdf

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

[Arraya]

http://api.ning.com:80/files/CdXtKqMgxHL4M8EYE8FhdO8KVYCEx0nMLUYAjpPIbVo_/walking_away_paper.pdf

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

[Arraya]

http://api.ning.com:80/files/CdXtKqMgxHL4M8EYE8FhdO8KVYCEx0nMLUYAjpPIbVo_/walking_away_paper.pdf

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

[Arraya]

http://api.ning.com:80/files/CdXtKqMgxHL4M8EYE8FhdO8KVYCEx0nMLUYAjpPIbVo_/walking_away_paper.pdf

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

[Arraya]

http://api.ning.com:80/files/CdXtKqMgxHL4M8EYE8FhdO8KVYCEx0nMLUYAjpPIbVo_/walking_away_paper.pdf

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

[davelj]

[quote=Arraya]

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

I think that “most homeowners continue to make their payments even when they are significantly underwater” because they realize that the position they’re in is ultimately mostly (and in many cases, entirely) their own fault… and they feel that they, rather than their lender, should bear the consequences of such abject stupidity, despite the fact that yes, technically (re: legally), they could walk away from their obligation.

[davelj]

[quote=Arraya]

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

I think that “most homeowners continue to make their payments even when they are significantly underwater” because they realize that the position they’re in is ultimately mostly (and in many cases, entirely) their own fault… and they feel that they, rather than their lender, should bear the consequences of such abject stupidity, despite the fact that yes, technically (re: legally), they could walk away from their obligation.

[davelj]

[quote=Arraya]

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

I think that “most homeowners continue to make their payments even when they are significantly underwater” because they realize that the position they’re in is ultimately mostly (and in many cases, entirely) their own fault… and they feel that they, rather than their lender, should bear the consequences of such abject stupidity, despite the fact that yes, technically (re: legally), they could walk away from their obligation.

[davelj]

[quote=Arraya]

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

I think that “most homeowners continue to make their payments even when they are significantly underwater” because they realize that the position they’re in is ultimately mostly (and in many cases, entirely) their own fault… and they feel that they, rather than their lender, should bear the consequences of such abject stupidity, despite the fact that yes, technically (re: legally), they could walk away from their obligation.

[davelj]

[quote=Arraya]

Abstract:
Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Abstract:
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 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 encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

I think that “most homeowners continue to make their payments even when they are significantly underwater” because they realize that the position they’re in is ultimately mostly (and in many cases, entirely) their own fault… and they feel that they, rather than their lender, should bear the consequences of such abject stupidity, despite the fact that yes, technically (re: legally), they could walk away from their obligation.

[davelj]

[quote=Arraya]Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

The reason that this “norm asymmetry leads to distributional inequalities” is that most folks will concede that without the buyer/borrower making the first move – that is, finding a property they first want to buy and then seeking out a lender to finance it – a mortgage isn’t created. (The Prime Mover argument.)

Since the buyer/borrower is the prime mover, why shouldn’t s/he shoulder a disproportionate burden from the housing collapse? It seems completely logical to me given the nature of how the transaction arises in the first place.

[davelj]

[quote=Arraya]Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

The reason that this “norm asymmetry leads to distributional inequalities” is that most folks will concede that without the buyer/borrower making the first move – that is, finding a property they first want to buy and then seeking out a lender to finance it – a mortgage isn’t created. (The Prime Mover argument.)

Since the buyer/borrower is the prime mover, why shouldn’t s/he shoulder a disproportionate burden from the housing collapse? It seems completely logical to me given the nature of how the transaction arises in the first place.

[davelj]

[quote=Arraya]Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

The reason that this “norm asymmetry leads to distributional inequalities” is that most folks will concede that without the buyer/borrower making the first move – that is, finding a property they first want to buy and then seeking out a lender to finance it – a mortgage isn’t created. (The Prime Mover argument.)

Since the buyer/borrower is the prime mover, why shouldn’t s/he shoulder a disproportionate burden from the housing collapse? It seems completely logical to me given the nature of how the transaction arises in the first place.

[davelj]

[quote=Arraya]Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.[/quote]

The reason that this “norm asymmetry leads to distributional inequalities” is that most folks will concede that without the buyer/borrower making the first move – that is, finding a property they first want to buy and then seeking out a lender to finance it – a mortgage isn’t created. (The Prime Mover argument.)

Since the buyer/borrower is the prime mover, why shouldn’t s/he shoulder a disproportionate burden from the housing collapse? It seems completely logical to me given the nature of how the transaction arises in the first place.

[Author]

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