The phrase "incentive to default" is correct and can be used in written English.
It refers to a potential motivation or reason for someone to not fulfill their financial obligations or payments. Example: The high interest rates on this loan provide a strong incentive to default for those who are struggling to make ends meet.
The borrower thus has an incentive to default on a mortgage worth more than his home.
"The problem is, if you just focussed on the people who defaulted you create this huge incentive to default," Orszag replied.
In an attempt to reduce the incentive to default, Fannie Mae recently increased to five years, from four years, the time borrowers have to wait after a foreclosure to get another Fannie Mae loan.
For Britain and the Netherlands there was no incentive to default on the debt owed to the classes that controlled them.Special report Repent at leisure Paradise foreclosed The morning after Betting the balance-sheet A better bust?
Banks don't want to let borrowers who can really pay off the hook, to give others an incentive to default, or to recognise more losses.Bankruptcy laws could be changed to allow courts to reduce principal, much as they can for the debt of a company in Chapter 11.
"If homeowners needed an incentive to default they would be doing so already".
Banks are wary of moral hazard: if word spreads, borrowers with the ability to pay their mortgage may deliberately miss payments in order to get their loans adjusted.This last problem can be addressed by changing borrowers' incentives to default.
I use a mechanism design approach so that agents' incentives to default are explicit and contingent on the credit policy designed.
Unlike sub-prime borrowers, prime borrowers have credit ratings that are worth something to them, and this gives them an incentive not to default.
