The determinants of attitudes toward strategic default on mortgages

Luigi Guiso*, Paola Sapienza, Luigi Zingales

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

152 Scopus citations

Abstract

We use survey data to measure households' propensity to default on mortgages even if they can afford to pay them (strategic default) when the value of the mortgage exceeds the value of the house. The willingness to default increases in both the absolute and the relative size of the home-equity shortfall. Our evidence suggests that this willingness is affected by both pecuniary and non-pecuniary factors, such as views about fairness and morality. We also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued.

Original languageEnglish (US)
Pages (from-to)1473-1515
Number of pages43
JournalJournal of Finance
Volume68
Issue number4
DOIs
StatePublished - Aug 2013

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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