Deleveraging and mortgage curtailment

Meagan McCollum, Hong Lee and R. Kelley Pace

Journal of Banking & Finance, 2015, vol. 60, issue C, 60-75

Abstract: Using monthly loan-level data, individual partial prepayments (curtailments) from January 2001 to June 2011 are observed for mortgages in twenty metropolitan statistical areas. Contrary to some earlier assertions, American homeowners now frequently commit funds towards their mortgage payments in excess of the amount due; over 30% of loans outstanding have made at least one curtailment payment. After controlling for borrower and loan-level variables, we show that the latent propensity to curtail has steadily risen from 2003 to 2006 and remains at elevated levels. Therefore, curtailment provides an example of consumer deleveraging behavior that began prior to the Great Recession.

Keywords: Mortgages; Curtailment; Prepayment; Deleveraging; Personal finance (search for similar items in EconPapers)
JEL-codes: D14 E32 G01 G21 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:60:y:2015:i:c:p:60-75

DOI: 10.1016/j.jbankfin.2015.06.019

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