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Strategic Foreclosure as an Indicator of Eroding Institutional Structures

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  • William Redmond
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    Abstract

    Many houses purchased just before the housing bubble burst have a market value lower than the amount of the mortgages on them; they are said to be underwater. Among homeowners in such a position, a number have adequate financial wherewithal to make the payments but choose to voluntarily default on the loan. Evidence suggests that a growing number of homeowners are taking this course, known as strategic, or voluntary, foreclosures. Once a stigma, voluntary foreclosure seems to be gaining in social acceptability. The phenomenon appears to be reflective of the broad trend that Max Weber termed the increasing rationalization of society.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.

    Volume (Year): 46 (2012)
    Issue (Month): 2 (June)
    Pages: 565-572

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    Handle: RePEc:mes:jeciss:v:46:y:2012:i:2:p:565-572

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    Web page: http://www.mesharpe.com/mall/results1.asp?acr=jei

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    Keywords: foreclosure; housing crisis; rationalization;

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