Annie Lowrey has a post on a new effort to penalize strategic defaulters:

Last week, I noted that House Republicans had introduced a motion to penalizestrategic defaulters — underwater homeowners who simply stop paying their mortgages and surrender their homes to the bank — by barring them from obtaining Federal Housing Administration-backed loans in the future. I hadn’t noticed until now, but the House ended up passing its FHA Reform Act with the penalization for strategic defaulters in the bill. (The act now needs Senate approval before it becomes law.) Rep. Chris Lee (R-N.Y.) got the provision in there on an unopposed unanimous consent motion.

The problem, as Lowrey explains, is that it is very difficult to determine who is and who is not a strategic defaulter. For example, am I a strategic defaulter if I could earn more as an actuary than as a jazz musician, yet I refuse to abandon my bohemian lifestyle in order to make enough to carry my burdensome mortgage?

That said, it’s not obvious that the penalty involved — barring defaulters from obtaining FHA-backed loans in the future — doesn’t have an upside. If you believe as I do that homeownership rates are too high, expanding the pool of renters could improve the rental market in a variety of ways. In most metropolitan areas, there isn’t a very thick market for renting single-family homes. And many U.S. households prefer detached single-family dwellings to multi-unit apartments.

As Lowrey notes, “strategic defaulters are not committing some felony or crime.” Mortgage contracts stipulate that homeowners that don’t pay will be evicted from their homes, and strategic defaulters have decided that this is an acceptable outcome. So I can see why many object to layering on a new penalty, and that’s leaving aside the conceptual difficulty of defining what constitutes strategic default. But the penalty doesn’t strike me as particularly onerous. As I understand it, the penalty essentially means that if you don’t meet the responsibilities of homeownership at some point in time, you are barred from a certain form of taxpayer-subsidized homeownership in the future. Strategic defaulters already have to repair their credit for years after an eviction. This layers on a new and not necessarily insurmountable constraint. One imagines that a specialty market would eventually emerge to serve potential homeowners ineligible for FHA loans, assuming large numbers of strategic defaulters are crazy enough to take another gamble on the housing market.

More prosaically, one wonders how this provision will be enforced. How good are the information infrastructures that undergird the mortgage finance system?