Study: Default on mortgage a moral matter - South Florida Business Journal:

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The report finds that 17 percent of householdsewould default, even if they can afford to pay their mortgage, when the equitt shortfall reaches 50 percent of the value of the "We're in a completely different economic environmenty today, where for the first time sinces the Great Depression millions of Americans have mortgage loans that exceed the value of their said Paola Sapienza of the at who led the research. Moralituy plays a big role in the decision to walk thestudy found.
Thos who said it was immoralp to default were 77 percent less likelyt to declare their intention todo so, while people who know someone who defaulteed were 82 percent more likely to say they would defaulrt themselves. "Our research showedr there is a 'multiplication where the social pressure not to default is weakened when homeownerzs live in areas of high frequency of foreclosures or know otherzs whodefaulted strategically,” said Luigi Zingales of the Universityu of Chicago Booth School of Business, and one of the study’sd co-authors.
People under the age of 35 and over the age of 65 were less likelg to say it was morally wrong to defaulft comparedto middle-aged respondents. People with higher education (eighg percentage points) and African-Americans (14 percentag points) are less likely to think it is morally wron gto default, whereas respondents with a highere income are more likely to think it is moralluy wrong. Default is considered less morally wrong inthe U.S. Northeast (six percentages points) and West (8 1/2 percentage points). There was little difference in the moral view of strategivc default among Republicansand Democrats, but Independents were less likelyt to say defaulting is immoral.
were 12 percentage pointw less likely to say strategix defaultis immoral. "As defaults become more the social stigma attacher with defaulting will likelybe reduced, especially if therd continues to be few repercussions for people who walk away from thei r loans," concluded Sapienza. "Thias has an adverse effect on homeownerw who do paytheir mortgages, and the after-effects of more defaultss and more price collapse could be economic