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Strategic Foreclosure as an Indicator of Eroding Institutional Structures


  • William Redmond


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.

Suggested Citation

  • William Redmond, 2012. "Strategic Foreclosure as an Indicator of Eroding Institutional Structures," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(2), pages 565-572.
  • Handle: RePEc:mes:jeciss:v:46:y:2012:i:2:p:565-572
    DOI: 10.2753/JEI0021-3624460232

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