A model of mortgage default : [Version Februar 2014]
- 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.
| Author: | John Y. Campbell, João F. Cocco |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-333206 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 452 |
| Series (Serial Number): | CFS working paper series (452) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2014 |
| Year of first Publication: | 2014 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2014/03/21 |
| Tag: | Household finance; Loan to income ratio; Loan to value ratio; Mortgage affordability; Mortgage premia; Negative home equity |
| Issue: | Version Febr. 2014 |
| First Page: | 1 |
| Note: | This version: February 2014 ; First draft: November 2010 |
| HeBIS-PPN: | 349979227 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
