Remember last year when the federal government tried slowing the foreclosure crisis? Scores of mortgage companies were "asked" to help strapped homeowners stay in their homes.
A program was set up to reduce mortgage rates to as low as 2 percent for five years.
What a deal! What a -- dud:
"So, after ten months, the federal government, with all its power, has been able to cajole only 1700 homeowners in the entire country into filling out the paperwork to get a sweetheart mortgage deal. Maybe the problem is that the homeowners realize that a 2 percent loan on $500,000 when the house is worth only $280,000 is not as sweet a deal as walking away from the loan."
-- Robert Prechter, The Elliott Wave Theorist, December 2009
Underwater "homeowners" are finding it much sweeter to just walk. Guilt?
Seems not -- some are taking the extra money and spending it on enjoyments. One couple stopped paying their mortgage last summer. Says The New York Times, May 31:
"Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat for the weekend. Visit the Hard Rock Casino."
You think it's just those who can't afford to pay that are doing the "mortgage shuffle"? No. According to CBS News, "It's estimated that one million Americans walked away from homes 'underwater'...even though they could afford the payments. It's called 'strategic default'."
It seems stiffing your mortgage lender is more than okay -- it's often labeled "smart." Plus, it's easier to "walk away" when your neighbors are. There are even websites in business to help people do just that.
"...defaulting on homes is contagious," wrote Prechter in the July 2009 Elliott Wave Theorist. He went on to quote The Economist: "Homeowners who know someone who has defaulted strategically are 82% more likely to say they would do so, too."
Not only do we have an on-going real estate crisis -- a new "normal" in attitudes toward financial responsibility is evolving.
Beyond housing, if our whole financial system weakens further what other new social "norms" can we expect? Our independent research keeps you on top of investor psychology and changing social trends -- so you're not surprised by the inevitable changes we see ahead. Join others who subscribe to our Financial Forecast Service -- but first, read us for a full 30 days absolutely risk-free. Here's how.