The role of informational uncertainty in the decision to strategically default

Michael Seiler ()

Journal of Housing Economics, 2015, vol. 27, issue C, 49-59

Abstract: This study identifies a severe gap between the financial backlash borrowers believe awaits them after strategic mortgage default and the reality that lenders rarely pursue deficiency judgments. This coupled with the social norm finding that borrowers widely view strategic default as immoral, leads us to recommend lenders and policymakers seeking to stem the tide of defaults to pursue a policy of informational opacity. We make several recommendations for how to carry out such a policy as well as what might need to change in society before the alternative policy of informational transparency becomes ideal.

Keywords: Strategic mortgage default; Informational transparency/opacity; Informational uncertainty; Lender recourse (search for similar items in EconPapers)
JEL-codes: D10 D81 K11 K12 R20 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:27:y:2015:i:c:p:49-59

DOI: 10.1016/j.jhe.2015.02.006

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