Mortgage Defaults

Leonardo Martinez, Juan Hatchondo and Juan Sanchez

No 2012/026, IMF Working Papers from International Monetary Fund

Abstract: This paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model. The model is calibrated to match U.S. data and accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. The average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing but housing increases the values of these coefficients for younger agents. The response of consumption to house price shocks is minimal. The introduction of minimum down payments or income garnishment benefits a majority of the population.

Keywords: WP; down payment; price level; home equity; mortgage; default; life cycle; garnishment; default decision; house price shock; default rate; insurance coefficient; payment obligation; Housing prices; Housing; Mortgages; Consumption; Income (search for similar items in EconPapers)
Pages: 33
Date: 2012-01-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Mortgage defaults (2015)
Working Paper: Mortgage Defaults (2015)
Working Paper: Mortgage defaults (2011)
Working Paper: Mortgage defaults (2011)
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