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Can shame stop them? Strategic default is the option some underwater homeowners are choosing to get out from under an expensive mortgage they signed on to pay. Homeowners who owe more on their mortgage than the home is worth, meaning that if they sell their house they will still owe the bank money, are considered underwater.

Strategic Default - Homeowners Walk Away from Underwater Mortgages, Shame?

They borrowed money against the home when prices were high and now that the housing market has settled down, they are stuck with a huge mortgage and the value of the home if sold isn't enough to pay off the mortgage.

Many times they can't afford to pay, or are unwilling to pay, and decide to walk away from the contract, leaving the bank (or is this case the US taxpayer that bailed out the banks) on the hook for the cash.


On Freddie Mac's blog, "Featured Perspectives," executive Don Bisenius takes on strategic defaulters. He tries to shame them out of walking.

He writes: "Let's start with the neighbors. When strategic defaults occur, homes go into foreclosure and sit vacant for some period of time. We know from experience that foreclosures and vacancies drive down the property values of everyone else in the neighborhood. Thus, strategic defaulters, in effect, deplete the personal wealth of their neighbors."

Read the full post.

Will shame really work to stop those that are willing to allow you to pay off their debts?