Fear, Shame and Guilt: Economic and Behavioral Motivations for Strategic Default

This study examines underwater primary resident homeowners to identify why some decide to strategically default while others do not. We find that realized shame and guilt are consistent with ex ante expectations. However, the financial backlash experienced by strategic defaulters is less than anticipated, causing strategic defaulters not to regret their actions. State‐specific bankruptcy exemption levels and real estate laws only marginally...