The Role of Informational Uncertainty in the Decision to Strategically Default

33 Pages Posted: 12 Jul 2014

See all articles by Michael Seiler

Michael Seiler

College of William and Mary - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 4, 2014

Abstract

This study identifies a severe gap between the financial backlash borrowers believe awaits them after strategic mortgage default and the reality that lenders rarely pursue deficiency judgments. This, coupled with the social norm finding that borrowers widely view strategic default as immoral, leads us to recommend lenders and policymakers seeking to stem the tide of defaults to pursue a policy of informational opacity. We make several recommendations for how to carry out such a policy as well as what might need to change in society before the alternative policy of informational transparency becomes ideal.

Keywords: strategic mortgage default, informational transparency/opacity, informational uncertainty, lender recourse

JEL Classification: D10, D81, K12, K11, R20

Suggested Citation

Seiler, Michael, The Role of Informational Uncertainty in the Decision to Strategically Default (June 4, 2014). Available at SSRN: https://ssrn.com/abstract=2465107 or http://dx.doi.org/10.2139/ssrn.2465107

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

VA
United States

HOME PAGE: http://mason.wm.edu/faculty/directory/seiler_m.php

Register to save articles to
your library

Register

Paper statistics

Downloads
94
Abstract Views
477
rank
231,686
PlumX Metrics