A Model of Mortgage Default
In this paper, we solve a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions....
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| Veröffentlicht in: | The Journal of finance (New York) 2015-08, Vol.70 (4), p.1495-1554 |
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| container_end_page | 1554 |
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| container_issue | 4 |
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| container_title | The Journal of finance (New York) |
| container_volume | 70 |
| creator | CAMPBELL, JOHN Y. COCCO, JOÃO F. |
| description | In this paper, we solve a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable versus fixed mortgage rates, loan-to-value ratios, and mortgage affbrdability measures on mortgage premia and default. Mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable-rate mortgages during the recent U.S. housing downturn, and the variation in mortgage premia with the level of interest rates. |
| doi_str_mv | 10.1111/jofi.12252 |
| format | Article |
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Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable versus fixed mortgage rates, loan-to-value ratios, and mortgage affbrdability measures on mortgage premia and default. Mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable-rate mortgages during the recent U.S. housing downturn, and the variation in mortgage premia with the level of interest rates.</description><subject>Decision making models</subject><subject>Default</subject><subject>Housing market</subject><subject>Housing prices</subject><subject>Income</subject><subject>Inflation</subject><subject>Interest rates</subject><subject>Lenders</subject><subject>Mortgage markets</subject><subject>Mortgage rates</subject><subject>Studies</subject><subject>U.S.A</subject><issn>0022-1082</issn><issn>1540-6261</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2015</creationdate><recordtype>article</recordtype><recordid>eNp9kM1Lw0AQxRdRsFYvXkUoeBEhdb93eyytrS3VeijobdnGSUlMu3U3QfvfmxjtwYPvMgPv94bhIXROcJdUus1cknYJpYIeoBYRHEeSSnKIWhhTGhGs6TE6CSHDtYRooYt-58G9Qt5xSbX4YmVX0BlCYsu8OEVHic0DnP3MNlqM7haD-2g2H08G_VkUC8ppBAnmWluSgOQaqGCaguUMpKJMS8lAxFTzJWgreKyXmkrGICZLpXpC6pi10XVzduvdewmhMOs0xJDndgOuDIYozBnHmOMKvfqDZq70m-q5msJKCiVURd00VOxdCB4Ss_Xp2vqdIdjUNZm6JvNdUwWTBv5Ic9j9Q5rpfDT5zVw2mSwUzu8znElCe7RX-VHjp6GAz71v_ZuRiilhnh_HZjp4Wgyn-MX02BdYmn5u</recordid><startdate>201508</startdate><enddate>201508</enddate><creator>CAMPBELL, JOHN Y.</creator><creator>COCCO, JOÃO F.</creator><general>Blackwell Publishing Ltd</general><general>Wiley Periodicals,Inc</general><general>Blackwell Publishers Inc</general><scope>BSCLL</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>201508</creationdate><title>A Model of Mortgage Default</title><author>CAMPBELL, JOHN Y. ; COCCO, JOÃO F.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c5242-ef0488a1fe648e25382ea43e67238663e5c284be8a54c8b82633ec1b779568c3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2015</creationdate><topic>Decision making models</topic><topic>Default</topic><topic>Housing market</topic><topic>Housing prices</topic><topic>Income</topic><topic>Inflation</topic><topic>Interest rates</topic><topic>Lenders</topic><topic>Mortgage markets</topic><topic>Mortgage rates</topic><topic>Studies</topic><topic>U.S.A</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>CAMPBELL, JOHN Y.</creatorcontrib><creatorcontrib>COCCO, JOÃO F.</creatorcontrib><collection>Istex</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>The Journal of finance (New York)</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>CAMPBELL, JOHN Y.</au><au>COCCO, JOÃO F.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>A Model of Mortgage Default</atitle><jtitle>The Journal of finance (New York)</jtitle><addtitle>The Journal of Finance</addtitle><date>2015-08</date><risdate>2015</risdate><volume>70</volume><issue>4</issue><spage>1495</spage><epage>1554</epage><pages>1495-1554</pages><issn>0022-1082</issn><eissn>1540-6261</eissn><coden>JLFIAN</coden><abstract>In this paper, we solve a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. 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| ispartof | The Journal of finance (New York), 2015-08, Vol.70 (4), p.1495-1554 |
| issn | 0022-1082 1540-6261 |
| language | eng |
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| source | Access via Wiley Online Library; JSTOR Archive Collection A-Z Listing |
| subjects | Decision making models Default Housing market Housing prices Income Inflation Interest rates Lenders Mortgage markets Mortgage rates Studies U.S.A |
| title | A Model of Mortgage Default |
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