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Strategic Defaulters Influenced by Social Persuasion: Study

Unemployment and other economic difficulties have caused millions of homeowners to involuntarily default on their mortgages, but there are some borrowers who are induced to simply stop making their mortgage payments because their property value has fallen and they owe more than their home is worth.

According to a study commissioned by the Mortgage Bankers Association (MBA), oftentimes strategic defaulters are encouraged to walk away at the behest of so-called mavens, or prominent influencers within a borrower’s social network whose persuasive arguments convince the borrower that strategic default is the way to go.

The study, conducted by Michael J. Seiler of Old Dominion University; Andrew J. Collins of the Virginia Modeling, Analysis and Simulation Center; and Nina H. Fefferman of Rutgers University, examines the role that influential members of society play in people’s decision to stop paying their mortgage and the impact of strategic default on the broader housing market.

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