When Should You Stiff Your Lender?

A large number of homeowners remain in home where they owe more on their mortgage than it is worth. People get attached to their homes and they don't want the hassle of a foreclosure, the significant hit it gives to one's credit score, and they don't want the bother of moving.

What is the case for accepting foreclosure?

The Los Angeles Times reports:

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White contends that far more of the estimated 15 million U.S. homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume, he says.