“The Psychology of Strategic Defaults” plus 2 more

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• The Psychology of Strategic Defaults
• How The Mouse Grimace Scale Will Help Us Cope With Pain
• Web 3.0, The Movie [Video]

The Psychology of Strategic Defaults Posted: 10 May 2010 07:31 AM PDT By James R. Hagerty Many U.S. homeowners choose to default on mortgages out of anger, fear and despair rather than because they have made a purely rational decision about their best financial interests, a new study says. The study by Brent White, an associate professor of law at the University of Arizona, focuses on "strategic defaults," those in which a borrower who could afford to keep paying chooses not to do so. That phenomenon is frequently described as a rational response by homeowners who are "underwater," owing far more than the current values of their homes. But, Mr. White argues, the decision often is "driven primarily by emotion." Such borrowers "feel great anxiety about their financial situation, are overwhelmed by a sense of hopelessness and are angry" about what they see as a refusal by their lenders and the government to help, he writes in a paper based on his communications with more than 350 borrowers. Strategic defaults are becoming more common, various studies show, and mortgage lenders fear that borrowers who "walk away" will greatly increase the industry's foreclosure-related losses, which already total in the hundreds of billions of dollars. Strategic defaults accounted for 12% of all home-mortgage defaults in February, up from "insignificant levels" three years ago, Vishwanath Tirupattur and other analysts at Morgan Stanley & Co. estimated in a recent report. Estimating the number of strategic defaults is far from being an exact science. The Morgan Stanley analysts used a sample of 6.5 million first-lien mortgage loans originated in 2004 or later. They picked out borrowers who stayed current on other debt payments even as they fell 90 days behind on their mortgage loans, without making any further full or partial mortgage payments. They counted as strategic defaulters only the people in that category who also were underwater. Defaults are more likely to be strategic among people with higher credit scores and loan balances, Morgan Stanley found. That may be because people with higher credit scores typically have more money and thus can make a decision about whether to pay rather than simply defaulting when they run out of cash. People with very large loan balances also may feel more of an incentive to default on purpose. That's partly because government-subsidized programs to reduce payments for struggling borrowers are aimed at those with small or midsized loans. Most people continue to pay their mortgages even when they are underwater, Mr. White notes, adding that "the stigma against default apparently remains robust." Many borrowers don't seem even to consider strategic defaults until they have "greatly depleted or exhausted" their savings, Mr. White says. The choice may be whether to give up the house or rely on increasing credit-card debt to pay for food and other basic needs. But Mr. White also sees a "contagion effect," in which people become more likely to default strategically if they know others who have done so. Loan modification programs are supposed to provide hope but sometimes "actually fuel the hopelessness and anger" of borrowers because these programs "seem designed to wear homeowners down," Mr. White says. Borrowers often can't get responses from banks to their questions and are repeatedly told to send in the same documents. In addition, lenders typically offer reduced payments only to  homeowners who have defaulted or are considered likely to do so imminently. That angers people have borrowed more conservatively and kept up on their payments but now "feel unfairly left out while the 'less deserving' get help," Mr. White says. To give more homeowners an incentive to stay put, Mr. White suggests a "rent-based loan program" giving underwater borrowers payments in line with the costs of renting a comparable home. That would give borrowers a sense that they are paying a fair price for shelter, rather than "throwing their money away" on a loan that seems hopelessly underwater, he says. The Morgan Stanley analysts prescribe more programs to reduce loan balances so borrowers can regain equity in their homes. The Federal Housing Administration is due to introduce later this year a program that will allow some underwater borrowers to refinance into a smaller loan, but it isn't clear whether banks will promote that option or whether many people will qualify. Please follow me for housing news on Twitter @jamesrhagerty Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

How The Mouse Grimace Scale Will Help Us Cope With Pain Posted: 10 May 2010 09:32 AM PDT Main Category: Pain / Anesthetics Article Date: 10 May 2010 - 6:00 PDT email to a friend   printer friendly   view / write opinions A new study by McGill University Psychology Professor Dr. Jeffrey S. Mogil shows that mice, like humans, express pain through facial expressions. The research will not only be an important tool in helping scientists ensure that laboratory animals don't suffer unnecessarily, but could lead to new and better pain-relief drugs for humans. Mogil, UBC Psychology Prof. Kenneth Craig and their respective teams have discovered that when subjected to moderate pain stimuli, mice showed discomfort through facial expressions in the same way humans do. Their study, published online May 9 in the journal Nature Methods, also details the development of a Mouse Grimace Scale that could inform better treatments for humans and improve conditions for lab animals. Because pain research relies heavily on rodent models, an accurate measurement of pain is paramount in understanding the most pervasive and important symptom of chronic pain, namely spontaneous pain, says Mogil. "The Mouse Grimace Scale provides a measurement system that will both accelerate the development of new analgesics for humans, but also eliminate unnecessary suffering of laboratory mice in biomedical research," says Mogil. "There are also serious implications for the improvement of veterinary care more generally." This is the first time researchers have successfully developed a scale to measure spontaneous responses in animals that resemble human responses to those same painful states. Mogil, graduate student Dale Langford and colleagues in the Pain Genetics Lab at McGill analyzed images of mice before and during moderate pain stimuli - for example, the injection of dilute inflammatory substances, as are commonly used around the world for testing pain sensitivity in rodents. The level of pain studied could be comparable, researchers said, to a headache or the pain associated with an inflamed and swollen finger easily treated by common analgesics like Aspirin or Tylenol. Mogil then sent the images to Craig's lab at UBC, where facial pain coding experts used them to develop the scale. Craig's team proposed that five facial features be scored: orbital tightening (eye closing), nose and cheek bulges and ear and whisker positions according to the severity of the stimulus. Craig's laboratory is a leader in studying facial expression as the standard for assessing pain in human infants and others with verbal communication limitations. This work is an example of successful "bedside-to-bench" translation, where a technique known to be relevant in our species is adapted for use in laboratory experiments. Continuing experiments in the lab will investigate whether the scale works equally well in other species, whether analgesic drugs given to mice after surgical procedures work well at their commonly prescribed doses, and whether mice can respond to the facial pain cues of other mice. Dr. Mogil, the E.P. Taylor Professor of Pain Studies at McGill, is a repatriated Canadian who was recruited in 2001 from the University of Illinois at Urbana-Champaign, where he first identified sex-specific genetic circuitry that governs the way males and females respond to pain. Dr. Mogil generally explores the genetic and environmental influences that combine to govern reactions to pain. He holds the Canada Research Chair in the Genetics of Pain (Tier 1). McGill University is renowned for its historic contributions to pain research, including the internationally recognized McGill Pain Questionnaire, developed by psychology professor Dr. Ronald Melzack in 1975 and still the standard today. Source McGill University Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

Web 3.0, The Movie [Video] Posted: 10 May 2010 12:07 PM PDT So much stuff. That's the general theme of a new short film, Web 3.0, by Kate Ray, a Journalism/Psychology major at NYU. The 15-minute film (embedded below) is a pretty good general overview of the semantic web. That is, turning all of the data on the web into structured data so as to define relationships between it and derive meaning. Though I enjoy when Hunch co-founder Chris Dixon cautions in the film that "semantic web" is now a "marketing term that's abused and thrown around." The video includes interviews with Dixon, Tim Berners-Lee, Clay Shirky, David Weinberger, Nova Spivack, Jason Shellen, Lee Feigenbaum, John Hebeler, Alon Halevy, David Karger, and Abraham Bernstein. Check it out below. Five Filters featured article: The Art of Looking Prime Ministerial - The 2010 UK General Election. Available tools: PDF Newspaper, Full Text RSS, Term Extraction.

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