“We are in the middle of a huge housing crisis,” says Edmans. homes were in negative equity, and the number is expected to rise to 20 million by the end of the year.
According to a Deutsche Bank study published in January, 14 million U.S. Moreover, it could benefit the entire housing market by stabilizing prices and preventing homes from being abandoned, which can affect the value of an entire neighborhood. In a paper titled, “ The Responsible Homeowner Reward: An Incentive-Based Solution to Strategic Mortgage Default,” Edmans suggests that the program could help both homeowners and the financial institutions holding the mortgages avoid the painful, costly process of a default. Wharton finance professor Alex Edmans is researching a new way to prevent the latter, which are known as “strategic defaults.” His idea involves an incentive program, called a Responsible Homeowner Reward (RH Reward), which offers borrowers a sizeable cash reward if they repay their entire mortgages. Others, however, own properties that are in “negative equity” - that is, the value of their homes is less than the amount of the mortgage - and they have decided that it makes more sense financially to stop paying their mortgages and start fresh. Some of those homeowners are unemployed or have fallen otherwise on hard times and just cannot afford to make payments. Crisis Leadership: Harness the Experience of Others February 14, 2023Īs the housing market languishes in the doldrums, an astoundingly high number of homeowners in the U.S.Choosing a New Board Leader: Eight Questions March 7, 2023.Speak With Confidence: Four Fixes That Work April 11, 2023.It’s Not You - It’s Your Goals: Knowing When to Quit May 30, 2023.
NEXT WAVE OF MORTGAGE DEFAULTS HOW TO
Meet the Authors: Wharton’s Peter Cappelli on The Future of the Office November 4, 2021.Meet the Authors: Erika James and Lynn Perry Wooten on The Prepared Leader October 3, 2022.Navigating Microaggressions at Work November 1, 2022.How National Politics Are Impacting DEI in the Workplace February 7, 2023.Diversity at Work: Why Inclusive Storytelling Matters April 4, 2023.Improving Accessibility in the Workplace - and in Space May 16, 2023.Great Question: Kevin Werbach on Cryptocurrency and Fintech July 21, 2021.Great Question: Dean Erika James on Crisis Management August 16, 2021.Great Question: Wendy De La Rosa on Personal Finance October 15, 2021.Great Question: Witold Henisz on ESG Initiatives November 17, 2021.Making the Business Case for ESG May 3, 2022.How Companies and Capital Can Be Forces for Good June 21, 2022.
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