NBER Paper: "Strategic default rarely occurs"

Ht to Nick Timiraos for link to the paper. An NBER paper from Kristopher Gerardi, Kyle F. Herkenhoff, Lee E. Ohanian, and Paul S. Willen Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default On the flip side we find that less than 1 percent of "can pay" households, which we define to be households that are employed and have at least 6 months worth of mortgage payments in stock, bonds, or liquid assets (net of unsecured debt) are in default. Conditioning on negative equity does not have much effect as only 5 percent of "can pay" borrowers with negative equity are in......(read more)

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