Alex Tabarrok (Marginal Revolution) reports this from Shiller…
“Strategic default on mortgages will grow substantially over the next year, among prime borrowers, and become identified as a serious problem. The sense that ‘everyone is doing it’ is already growing, and will continue to grow, to the detriment of mortgage holders. It will grow because of a building backlash against the financial sector, growing populist rhetoric and a declining sense of community with the business world. Some people will take another look at their mortgage contract, and note that nowhere did they swear on the bible that they would repay.” (WSJ)
My experience ex Provincial Finance on this is that some borrowers did get “confused” in thinking that with a company in receivership their obligation ceased. This little fantasy was easily corrected.
The genuine “no morals” had long gone… money never to be seen again. With 29,000 borrowers, even a normal distribution is going to throw up a huge number of miscreants. The main parties not understanding this were investors collecting 8% – 11% and never bothering to ask why the returns were so high.
This last point has got close to zero recognition… thereby increasing the chances of it happening all over again.