About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

64 Vand. L. Rev. 1545 (2011)
Breaching the Mortgage Contract: The Behavioral Economics of Strategic Default

handle is hein.journals/vanlr64 and id is 1555 raw text is: Breaching the Mortgage Contract: The Behavioral Economics of Strategic Default Tess Wilkinson-Ryan 64 Vand. L. Rev. 1547 (2011) Underwater homeowners face a quandary: Should they make their monthly payments as promised or walk away and save money? Traditional economic analysis predicts that homeowners will strategically default (voluntarily enter foreclosure) when it is cheaper to do so than to keep paying down the mortgage debt. But this prediction ignores the moral calculus of default, which is arguably much less straightforward. On the one hand, most people have moral qualms about breaching their contracts, even when the financial incentives are clear. On the other hand, the nature of the lender-borrower relationship is changing and mortgage lenders are increasingly perceived as remote, profit-obsessed entities undeserving of moral concern. In the studies reported here, I tease out three distinct psychological effects of this perception, including the erosion of reciprocity norms, an increase in social distance, and the destigmatization of foreclosure. The results have ramifications for current debates about securitization and modification of mortgage loans.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most