The Financial Trust Index (sponsored jointly by the Kellogg School of Management at Northwestern University and the University of Chicago Booth School of Business) has released a white paper titled "“Moral and Social Restraints to Strategic Default on Mortgages,”.

This research looks at American homeowners propensity to default when the value of a mortgage exceeds the value of their house, even if they can afford to pay their mortgage. By using new survey data, the paper estimates that more than a quarter of defaults on mortgage loans are strategic, especially when home values have fallen by more than 15 percent.

Additionally the research looks at:

• What percentage would default if the equity shortfall is less than 10% of the value of the house.
• What percentage would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house.
• Moral and social considerations in predicting strategic default.
• Ceteris paribus, people who consider it immoral to default vs. people who know someone who defaulted in regards to declaring their intention to do so.
• The willingness to default in proportion with the number of foreclosures in the same ZIP code.

To view a Press Release on the White Paper, please click here.

To view the White Paper in its entirety, please click here.