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

Velma Zahirovic-Herbert, Karen M. Gibler and Swarnankur Chatterjee

International Journal of Housing Markets and Analysis, 2016, vol. 9, issue 2, 164-189

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.

Keywords: USA; Financial literacy; Interest rates; Housing finance systems; Home loan; Mortgage delinquency (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijhmap:v:9:y:2016:i:2:p:164-189

DOI: 10.1108/IJHMA-12-2014-0060

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