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Please consider Legal Studies Discussion Paper by University of Arizona College Professor

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.

This paper discusses many aspects of foreclosure and social behaviors relating to strategic default.  Something that stood out to me is that the government (free housing counselors) and the media (newspapers, radio and TV news) generally influence people to avoid foreclosure at all costs, even if it means starving yourself and though it may not be best for you and your family.

When I started YouWalkAway.com, I thought to myself, we are here to help people who have exhausted all other options and are faced with the last option, foreclosure.  We aimed to help these people, who are predominantly good people by the way, minimize the damage that it may cause (financially, legally, emotionally, etc.).  Now, there has been a tremendous shift and trend where many of the people seeking our help are deciding that foreclosure is a much better option than staying.  Homeowners that are upside down on their mortgages are starting to strategically default and stay in their home payment free till the auction.  Even if strategic default is your best option, you shouldn’t do it alone.  There are a lot of questions you need to ask yourself and some legal advice you should get before you go through with it.  It may be able to save you tens, if not hundreds of thousands of dollars to do so.  Use this strategic default calculator to help.  How much is a credit score worth to you? is it worth $1o,ooo, $50,000, $150,000?

I spoke to Professor Brent T. White and one of the things we discussed is that the people who are upset at strategic defaulters are mostly motivated by selfish reasons. Deep down, they don’t necessarily believe these people are “immoral”, they are simply worried that if more people go through foreclosure, they will lose the little bit of equity they have left in their home.

If you call a government sponsored free agency, they are not going to say that default is an option, even though they may personally believe it would be best for you.  They are not allowed to bring it up, and the fear of losing their job will keep them from telling you to do so.

I applaud Professor Brent T. White for going against the grain and standing up for what he believes.  It takes courage and strength to speak the truth. I encourage you to download and read his paper, it has been getting a lot of attention in the media.

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