The more a homeowner is underwater on their mortgage, the more likely it is they're going to walk way from their loan despite their credit score, as Justin McHood recently wrote here at Mortgage Loan Place.
Now, a University of Arizona law professor has a controversial take on strategic defaults, going so far as to suggest that homeowners should default on their mortgages and not feel bad about it.
"Millions of U.S. homeowners could save hundreds of thousands of dollars by strategically defaulting on their mortgages," writes Brent T. White in his paper, Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis. "Homeowners should be walking away in droves. But they aren't."
White says many people continues to pay on their mortgage loans because they are concerned about the shame and embarrassment that comes with defaulting and going into foreclosure. He also says that a person's credit will take a big hit after going through a foreclosure, but that shouldn't keep him or her from strategically defaulting.
"But assuming one had otherwise good credit, and continues to meet other credit obligations, one can have a good credit rating again – meaning above 660 - within two years after a foreclosure," he writes.
He even advises people to make large purchases, such as a car, another home, or other items they need to set up a new residence. "Most individuals should be able to plan in advance for a few years of limited credit."
Of course mortgage lenders and many others disagree with White's advice. "Borrowers who walk away from their mortgage obligations face serious consequences," Fannie Mae spokesman Brian Faith told the Washington Post. "There's a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community."
What do you think? Is White's advice urging homeowners to strategically default irresponsible?