Sunday, May 09, 2010

Do homeowners' "strategic defaults" on upsidedown mortgages threaten economic recovery?

CBS “60 Minutes” on May 9 covered the practice of many homeowners who can afford their upsidedown mortgage payments of walking away from them anyway, a practice called “strategic default.” Up to ten states, including (apparently) Arizona (where the report was centered) do not allow banks to go for deficiency judgments after foreclosure, and some homeowners believe that they can work off the hits on their credit scores in a few years. There is no (“psychologically feminine”) shame (or masculine guilt), it’s just business. Big companies do it (as a default on Stuyvesant Town in Manhattan).

The practice, if it becomes widespread enough, could stall economic recovery and precipitate a “W-shaped” recession.

Watch CBS News Videos Online

Wikipedia attribution link for Phoenix picture

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