The Econtrarian

More and more we are hearing that occupants of residential real estate with mortgages far in excess of the current market value of the real estate are choosing to default on those mortgages. A Strategic Proposal to Combat Strategic Residential Mortgage Defaults

More and more we are hearing that occupants of residential real estate with mortgages far in excess of the current market value of the real estate are choosing to default on those mortgages. It is not that they do not have the income to keep current on their principal and interest payments. Rather, they have made a calculation that it would take many years for the value of their properties to rise back to the amount outstanding on the mortgages of these
properties. So, some have simply stopped sending in their monthly P&I payments and will just wait until the sheriff arrives with a foreclosure notice from the lender. This is not entirely irrational from an economic perspective, especially if one can rent a similar abode for less than the after-tax cost of home ownership.

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