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Unpublished Paper
Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis
ExpressO (2010)
  • Brent T. White, University of Arizona
Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. Such “norm asymmetry” systematically disadvantages borrowers in negotiations with lenders and has led to distributional inequities in which individual homeowners continue to shoulder a disproportionate burden from the housing collapse.
  • mortgage,
  • efficient breach,
  • behavioral law and economics,
  • housing crisis,
  • norms,
  • foreclosure,
  • law and emotion
Publication Date
February 16, 2010
Citation Information
Brent T. White. "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis" ExpressO (2010)
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