Credit Unions Somewhat Sheltered from Walking Away Phenomenon
The strong relationships credit unions forge with their members may be enough to protect them from the most severe impacts of having large numbers of home owners walk away from their mortgages, credit union economists and executives say.
The phenomenon of larger numbers of home owners deciding to "strategically default" on their home loans has gained more attention in the media lately. A law professor at the University of Arizona released a paper suggesting that walking away from mortgages where home values have fallen drastically may be the best economic decision for some homeowners.
There is no current data about how widespread the phenomenon has become, but anecdotal reports, particularly in states hardest hit by the crisis in home prices, indicate it may be growing.
But credit unions may be somewhat protected from the trend's direct impact because they are both more willing to work with their mortgage holders and because their home owners may feel guiltier about walking away from a credit union mortgage.
"I think most people realize that if they walk away from their mortgage, they are going to stick it to their lenders," commented NAFCU Chief Economist Dr. Tun Wai."I have to believe that most people would feel worse about doing that to a credit union than they would about doing that to a mega-bank."