When Luigi Zingales, professor at the University of Chicago, wrote that “Homeowners who walk away from their mortgages undermine our financial system,” he received strong criticism from some of his peers. Mark Zandi, chief economist at Moody’s, suggested that by not making their mortgage payments, the money saved is “a form of stimulus, a little tax cut.” This may explain the otherwise puzzling rise in consumer spending in the past quarter despite lagging employment and increasing unemployment claims.Ī larger issue being addressed here and elsewhere is the morality of these strategic defaults. He owes $100,000 more on his home than it’s worth, and says that even “if the economy picked back up and grew at a 3 percent rate … it would be at least 14 years before the house worth what my mortgage is … I would just have to look at it as a business decision.” He can afford to make his mortgage payment, but is wondering if he should. In central Florida, Dominick Dubrasky’s circumstances are similar. Or we could pay ourselves so our business could sustain us … it may sound very horrible, but it comes down to a self-preservation thing. We could pay the mortgage company way more than the house is worth and starve to death.
#Mortgage defaults plus#
When the owners of A Plus Restorations, Alex Pemberton and Susan Reboyras, stopped making their $1,837 monthly payments, they were then able to do some advertising to help their business grow.
LPS Applied Analytics says the average borrower in foreclosure “has been delinquent for 438 days before actually being evicted.” This means that the homeowner essentially lives rent-free for nearly 15 months, and can use his mortgage payment to make other payments such as car loans and credit cards. According to the New York Times, “A growing number of the people whose homes are in foreclosure are refusing to slink away in shame.” They are just refusing to make their mortgage payments but continue to live in their home until the bank evicts them.
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