Steadfast FinancesThe Social Stigma of Foreclosure is Ending

The Social Stigma of Foreclosure is Ending

Filed in Behavioral Economics , Business Ethics , Business Trends , Real Estate 1 comments

There is safety in numbers. Or so says the old adage tells us.

So with nearly 25 percent of all U.S. homes underwater, and estimates as high as 20 percent of all foreclosures being strategic defaults, more underwater homeowners are beginning to see others crossing the strategic default bridge. In fact, underwater homeowners are beginning to consider walking away to be the lesser of several evils when it comes to their financial future. A few might even feel less social pressure than ever before now that they have more company and guidance (e.g. social support for herding behavior) if they do decide to walk away from their mortgage.

So just like at your first middle school dance, once you see a few of your friends hit the dance floor, it doesn’t seem like such an intimidating idea to slow dance when that cute guy/girl in math class.

Which is why I find such statements in regards to walking away from your upside down mortgage to be so alarming, as well as interesting…

It’s almost like, the “in thing” to do right now.

I don’t have a position on this either way, but since strategic defaults is a growing business trend in the U.S., I do think it’s interesting to watch a centuries-old social construct unravel before our eyes.

For example…

  • If a bank or corporation strategically defaults on a loan, it’s okay, because they made a good business decision.
  • If John Q. Public strategically defaults on a loan, it’s heresy, because it’s immoral and it goes against everything America stands for.

This double standard, dare I say hypocritical rule of American real estate, could very well be a thing of the past.

Moreover, now that the Supreme Court ruled that a corporation has the same rights as an individual, shouldn’t individuals be afforded the same flexibility in terms of a complete disregard of accepted business ethics and only worry about whatever is best for themselves?

In other words, when bankers and government officials say it’s wrong to strategically default on your mortgage, isn’t this nothing but hypocritical “Hello Pot, Meet Kettle” logic?

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Posted by CJ   @   10 May 2010 1 comments
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May 11, 2010
5:15 pm
#1 Abigail :

I don’t think that people approve of banks strategically defaulting, either. The banks just had DC snowed into believing they were too big to fail.

In fact, most anyone who “strategically defaults” on a mortgage/loan had damn well better have a good story or I’ll be getting up on my high horse. (And it’s pretty high!)

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