Payment shock in HELOCs at the end of the draw period

Onesime Epouhe and Arden Hall

Journal of Economics and Business, 2016, vol. 84, issue C, 147 pages

Abstract: This paper examines the impact of payment shock in home equity lines of credit at the end of their draw period, when the loans become amortizing, using a unique dataset containing recent account level data. With a sample of accounts that have either reached end-or-draw, or are approaching it, we estimate a competing hazards model of default and prepayment. We relate default and prepayment to the timing and size of payment increases. We find that the approach of end-of-draw stimulates rising prepayment which peaks immediately after end-of-draw. Default only increases after end-of-draw and is sensitive to the size of the payment increase.

Keywords: Home Equity Line of Credit (HELOC); End-of-draw; Payment shock (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:84:y:2016:i:c:p:131-147

DOI: 10.1016/j.jeconbus.2016.02.006

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