Social Mores and Default Frequency

Before 1990 defaults on Hong Kong credit cards were very rare. It seems that then the holders viewed paying back their debt as a matter of face, and they would borrow from family or friends rather than default on an obligation to a bank. Between 1990 and 2000 the default frequency slowly rose, and now there is very little difference between U.S. and HK cards. It appears as if a more western attitude now prevails, with consequences for the holders of card deals.

A similar cultural change seems to be taking place in the U.S. Let's pick up the story with Bank of America CEO Ken Lewis:

There's been a change in social attitudes toward default [...] We're seeing people who are current on their credit cards but are defaulting on their mortgages, [...] I'm astonished that people would walk away from their homes.

Tanta takes up the story, quoting the recent Wachovia earnings call:

Part of one of the challenges is, and we've mentioned this before, a lot of this current losses have been coming out of California and it's -- they've been from people that have otherwise had the capacity to pay, but have basically just decided not to.

This could be huge for the CDRs on RMBS. And no one is coming to the rescue.