Juvenile delinquent mortgages: Bad credit or bad economy?
Richard Peach () and
Joseph Tracy ()
Journal of Urban Economics, 2008, vol. 64, issue 2, 246-257
We study early default, defined as serious delinquency or foreclosure in the first year, among nonprime mortgages from the 2001 to 2007 vintages. After documenting a dramatic rise in such defaults and discussing their correlates, we examine two primary explanations: changes in underwriting standards that took place over this period, and changes in the economic environment. We find that while credit standards were important in determining the probability of an early default, changes in the economy--especially a sharp reversal in house price appreciation--after 2004 were the more critical factor in the increases in default rates that we observe. An important additional result is that in spite of our rich set of covariates, much of the increase remains unexplained, even in retrospect. Thus, the fact that the credit markets seemed surprised by the rate of early defaults in the 2006 and 2007 nonprime vintages becomes more understandable.
Keywords: Housing; Mortgage; default; Subprime; mortgages; Negative; equity (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Juvenile delinquent mortgages: bad credit or bad economy? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:64:y:2008:i:2:p:246-257
Access Statistics for this article
Journal of Urban Economics is currently edited by S.S. Rosenthal and W.C. Strange
More articles in Journal of Urban Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().