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Looking behind mortgage delinquencies

Author

Listed:
  • Sauro Mocetti

    (Bank of Italy)

  • Eliana Viviano

    (Bank of Italy)

Abstract

We examine the delinquency rate for mortgages originated before and after the 2008 financial crisis, using a novel and large representative panel obtained by merging data from tax records and credit registers. First, we estimate the selection into the mortgage market using an exogenous index of local credit supply as exclusion restriction. Second, controlling for selection we estimate the impact of income shocks on the probability of recording a delinquency. We find that since 2008 the selection process operated by banks has led to the halving of the delinquency rate. Conditional on mortgage origination, a job loss nearly doubles the delinquency risk. Estimates uncorrected for selection are subject to severe downward biased.

Suggested Citation

  • Sauro Mocetti & Eliana Viviano, 2015. "Looking behind mortgage delinquencies," Temi di discussione (Economic working papers) 999, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_999_15
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    Cited by:

    1. Kristopher Gerardi & Kyle F. Herkenhoff & Lee E. Ohanian & Paul S. Willen, 2018. "Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default," The Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 1098-1131.
    2. Martin Hauptfleisch, 2019. "Financial Decision-Making Using Data," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 6-2019, January-A.
    3. Damian S. Damianov & Xiangdong Wang & Cheng Yan, 2021. "Google Search Queries, Foreclosures, and House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 63(2), pages 177-209, August.
    4. Slaymaker, Rachel & O'Toole, Conor & McQuinn, Kieran & Fahy, Mike, 2018. "Monetary policy normalisation and mortgage arrears in a recovering economy: The case of the Irish residential market," Papers WP613, Economic and Social Research Institute (ESRI).
    5. Wadud, Mokhtarul & Ali Ahmed, Huson Joher & Tang, Xueli, 2020. "Factors affecting delinquency of household credit in the U.S.: Does consumer sentiment play a role?," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    6. Kelly, Jane & Mazza, Elena, 2019. "Mortgage servicing burdens and LTI caps," Financial Stability Notes 13/FS/19, Central Bank of Ireland.
    7. O’Toole, Conor & Slaymaker, Rachel, 2021. "Repayment capacity, debt service ratios and mortgage default: An exploration in crisis and non-crisis periods," Journal of Banking & Finance, Elsevier, vol. 133(C).
    8. Okechukwu D. Anyamele, 2018. "Racial Ethnic differences in Household Loan Delinquency Rate in recent financial crisis: Evidence from 2007 and 2010 Survey of Consumer Finances," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(3), pages 1-4.
    9. Katharina Allinger & Elisabeth Beckmann, 2021. "Use of loan moratoria by CESEE households: who are the users and how vulnerable are they?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/21, pages 7-33.
    10. Merike Kukk, 2023. "What are the triggers for arrears on debt over a business cycle? Evidence from panel data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2811-2833, July.
    11. Sabrina Aufiero & Preben Forer & Pierpaolo Vivo & Fabio Caccioli & Silvia Bartolucci, 2024. "Phase transitions in debt recycling," Papers 2405.19104, arXiv.org.
    12. Merike Kukk, 2019. "Debt repayment problems: short-term and long-term implications for spending," Review of Economics of the Household, Springer, vol. 17(2), pages 715-740, June.
    13. Hu, Mingzhi & Lin, Zhenguo & Liu, Yingchun, 2024. "Financial literacy and mortgage stress," Journal of Banking & Finance, Elsevier, vol. 163(C).

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    More about this item

    Keywords

    mortgage delinquency; income; selection; lending policies;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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