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Financial literacy, risky mortgages, and delinquency in the US during the financial crisis

Author

Listed:
  • Velma Zahirovic-Herbert
  • Karen M. Gibler
  • Swarn Chatterjee

Abstract

Purpose - The purpose of this paper is to evaluate whether low financial literacy is associated with the use of risky mortgages and delinquency. Design/methodology/approach - A probit analysis is used to analyze the results of a survey of US homeowners. Findings - It was found that borrowers with low financial literacy are more likely to have a risky mortgage and be delinquent in their mortgage payments. Originality/value - The results indicate that many risky loan borrowers may be unable to evaluate the risks inherent in the mortgage, which contributes to high delinquency rates. These results suggest the need for education and caution in the use of risky mortgages.

Suggested Citation

  • Velma Zahirovic-Herbert & Karen M. Gibler & Swarn Chatterjee, 2016. "Financial literacy, risky mortgages, and delinquency in the US during the financial crisis," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 9(2), pages 164-189, June.
    • Handle: RePEc:eme:ijhmap:v:9:y:2016:i:2:p:164-189
    DOI: 10.1108/IJHMA-12-2014-0060
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    Citations

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    Cited by:

    1. David M. Harrison & Kimberly F. Luchtenberg & Michael J. Seiler, 2023. "Improving Mortgage Default Collection Efforts by Employing the Decoy Effect," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 840-860, May.
    2. Kwee Kim Peong, 2019. "Determinants of Personal Financial Literacy among Young Adults in Malaysian Accounting Firms," GATR Journals gjbssr524, Global Academy of Training and Research (GATR) Enterprise.
    3. Cliff A. Robb & Swarn Chatterjee & Nilton Porto & Brenda J. Cude, 2019. "The Influence of Student Loan Debt on Financial Satisfaction," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 51-73, March.
    4. Jackson T. Anderson & David M. Harrison & Michael J. Seiler, 2022. "Reducing Strategic Forbearance under the CARES Act: an Experimental Approach Utilizing Recourse Attestation," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 230-260, August.

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