European Parliament Library

Mortgage Defaults, Leonardo Martinez, Juan Carlos Hatchondo, Juan Sanchez

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
Table Of Contents
Cover; Contents; I. Introduction; II. The model; A. Housing; B. Earning and house price stochastic processes; C. Mortgage contracts and savings; D. Timing; E. Recursive formulation; F. Discussion of main assumptions; III. Calibration; IV. Results; A. Housing and mortgages; Tables; 1. Parameter values; 2. Benchmark simulations; Figures; 1. Down payment distribution; 2. Home ownership over the life cycle; B. Self-insurance; 3. Mortgages in default by tenure (in the simulations); 4. Mortgages not in default by tenure (in the simulations); 3. Insurance coefficients; 5. Insurance Coefficients
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (35 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781463954772

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