Wednesday, December 30, 2009

Strategic Default and the Fading Stigma of Foreclosure

It's important to pay attention to the sociological dimensions of the financial crisis (aka Great Recession) as it continues to evolve.

I think this article on SocketSite touches on a very interesting point. Social dynamics are at play as well as financial ones on the path to a mortgage loan default and foreclosure. But as the 'bug' spreads, and more and more of us know people who have faced foreclosure, it becomes less of a Scarlet Letter. And that implies that the social reasons to avoid foreclosure get weaker as it becomes more prevalent around us. It's a snowballing effect.

So before we are able to truly bottom, we need to combat this force as well as the purely economic ones.

Note - the study referenced here suggests that 1 in 3 California mortgage defaults in 2008 were strategic, which represents a 16x increase from the rate only 4 years earlier.

1 comment:

  1. Wow! 33% of people in Cal are defaulting? That's a growing trend in CA, AZ, NV, and FL. It will be many years before we get out of this mess.