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...They can still afford to pay but they decide not to," says Paola Sapienza, a finance professor at Northwestern University and one of the paper's authors. "It's very easy to do this in the U.S." Even though there are serious consequences to reneging on a home loan - including wrecked credit, not being able to buy another house for years to come, the cost of moving and the social stigma associated with being a person who does not honor one's commitments - lenders tend not to pursue former homeowners for the money they are owed because of the prohibitive...
Notably, other survey data included in the paper suggest the percentage of intentional defaults may be much lower than 26%. The researchers also asked if respondents themselves would welsh on their mortgages if they were $50,000 underwater. Among the people for whom $50,000 represented less than 10% of their home's value, none would walk away. However, once $50,000 represented between 10% and 20% of the house's value, 5% said they would walk away, and when the shortfall reached 50% of home's value, a full 17% said they would. (See "Renting a Modernist House...
Data from the new paper also point to the likelihood of mass walk-aways being a highly localized event. Sapienza and her colleagues plotted data on late mortgage payments and home-price declines and found very little relationship between the two when house prices in a metropolitan area had dropped less than 20% from their peak. However, once prices had fallen more than 20%, a disproportionate number of people wound up behind on their mortgage payments, even when the unemployment rate (a measure of means to pay) was held constant...
...paper published in the July 6 Proceedings of the National Academy of Sciences (PNAS) by a team of researchers at Princeton University offers a possible way out of the diplomatic dead end. Instead of simply considering carbon emissions on a national or per capita level, the Princeton team proposes a more granular system of climate accounting that would examine the range of individual emissions within countries. Thanks to economic growth, there are well-off people in almost every nation in the world - and the global middle class and wealthy, in India or Indiana, are responsible for most of the carbon...
...developing nations like China - with its rising middle class - won't be let off the hook either. "We think this represents a nice path for distributing the share of the work of cutting emissions between countries," says Chakravarty. The Copenhagen negotiations will be hard fought, but the Princeton paper offers hope that we can find a fair way to climate justice, when every person on the planet will have their fair share of the atmosphere...