This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The rise in mortgage defaults

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Christopher J. Mayer
Karen M. Pence
Shane M. Sherlund
Abstract

The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different mortgages. However, as markets realized the extent of the poor underwriting, underwriting standards tightened and borrowers began to face difficulties refinancing; this dynamic suggests that these unconventional products could pose problems going forward.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.federalreserve.gov/pubs/feds/2008/200859/200859abs.html
File Format: text/html
File Function:
Download Restriction: no
File URL: http://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2008-59.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:fip:fedgfe:2008-59

Contact details of provider:
Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
Web page: http://www.federalreserve.gov/
More information through EDIRC

Order Information:
Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords: Mortgage loans ; Subprime mortgage ; Default (Finance);

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Atif Mian & Amir Sufi, 2008. "The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis," NBER Working Papers 13936, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Markus K. Brunnermeier & Jonathan A. Parker, 2005. "Optimal Expectations," American Economic Review, American Economic Association, vol. 95(4), pages 1092-1118, September. [Downloadable!]
    Other versions:
  3. Larry Cordell & Karen Dynan & Andreas Lehnert & Nellie Liang & Eileen Mauskopf, 2008. "The incentives of mortgage servicers: myths and realities," Finance and Economics Discussion Series 2008-46, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2008. "Negative equity and foreclosure: theory and evidence," Public Policy Discussion Paper 08-3, Federal Reserve Bank of Boston. [Downloadable!]
    Other versions:
  5. Xavier Gabaix & David Laibson, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 505-540, May. [Downloadable!] (restricted)
    Other versions:
  6. John Y. Campbell, 2006. "Household Finance," NBER Working Papers 12149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "The 2006 HMDA data," Web Site, Board of Governors of the Federal Reserve System (U.S.), issue Sep. [Downloadable!]
    Other versions:
    • Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2008. "The 2007 HMDA data," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages A107-A146. [Downloadable!]
  8. Kristopher Gerardi & Adam Hale Shapiro & Paul S. Willen, 2007. "Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures," Working Papers 07-15, Federal Reserve Bank of Boston. [Downloadable!]
  9. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  10. Andrew Haughwout & Richard Peach & Joseph Tracy, 2008. "Juvenile delinquent mortgages: bad credit or bad economy?," Staff Reports 341, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  11. Christopher J. Mayer & Karen Pence, 2008. "Subprime Mortgages: What, Where, and to Whom?," NBER Working Papers 14083, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Bucks, Brian & Pence, Karen, 2008. "Do borrowers know their mortgage terms?," Journal of Urban Economics, Elsevier, vol. 64(2), pages 218-233, September. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Shane M. Sherlund, 2008. "The past, present, and future of subprime mortgages," Finance and Economics Discussion Series 2008-63, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Statistics
Access and download statistics

Did you know? RePEc and its associated services are free for contributors and users, and do not accept any advertising.

This page was last updated on 2009-11-7.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.