Arbeitspapier
A model of mortgage default
This paper solves a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. It uses a zero-profit condition for mortgage lenders to solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable vs. fixed mortgage rates, loan-to-value ratios, and mortgage affordability measures on mortgage premia and default. Heterogeneity in borrowers' labor income risk is important for explaining the higher default rates on adjustable-rate mortgages during the recent US housing downturn, and the variation in mortgage premia with the level of interest rates.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 452
- Klassifikation
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Macroeconomics: Consumption; Saving; Wealth
- Thema
-
household finance
loan to value ratio
loan to income ratio
mortgage affordability
negative home equity
mortgage premia
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Campbell, John Y.
Cocco, João F.
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Campbell, John Y.
- Cocco, João F.
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2014
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