Strategic Foreclosure as an Indicator of Eroding Institutional Structures

William Redmond

Journal of Economic Issues, 2012, vol. 46, issue 2, 565-572

Abstract: Many houses purchased just before the housing bubble burst have a market value lower than the amount of the mortgages on them; they are said to be underwater. Among homeowners in such a position, a number have adequate financial wherewithal to make the payments but choose to voluntarily default on the loan. Evidence suggests that a growing number of homeowners are taking this course, known as strategic, or voluntary, foreclosures. Once a stigma, voluntary foreclosure seems to be gaining in social acceptability. The phenomenon appears to be reflective of the broad trend that Max Weber termed the increasing rationalization of society.

Date: 2012
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DOI: 10.2753/JEI0021-3624460232

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