Abstract

http://ssrn.com/abstract=2546427
 


 



Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class


Manuel Adelino


Duke University; Duke Innovation & Entrepreneurship Initiative

Antoinette Schoar


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Felipe Severino


Tuck School of Business at Dartmouth

March 2016

Tuck School of Business Working Paper No. 2546427
Duke I&E Research Paper No. 15-8

Abstract:     
This paper highlights the importance of middle-class and high-FICO borrowers for the mortgage crisis. Contrary to popular belief, which focuses on subprime and poor borrowers, we show that mortgage originations increased for borrowers across all income levels and FICO scores. The relation between mortgage growth and income growth at the individual level remained positive throughout the pre-2007 period. Finally, middle-income, high-income, and prime borrowers all sharply increased their share of delinquencies in the crisis. These results are consistent with a demand-side view, where homebuyers and lenders bought into increasing house values and borrowers defaulted after prices dropped.

Number of Pages in PDF File: 53

Keywords: Mortgage credit, mortgage origination, financial crisis, income

JEL Classification: E44, E51, G21, L85, O51, R21, R30, D30, G21


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Date posted: January 9, 2015 ; Last revised: March 22, 2016

Suggested Citation

Adelino, Manuel and Schoar, Antoinette and Severino, Felipe, Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class (March 2016). Tuck School of Business Working Paper No. 2546427; Duke I&E Research Paper No. 15-8. Available at SSRN: http://ssrn.com/abstract=2546427 or http://dx.doi.org/10.2139/ssrn.2546427

Contact Information

Manuel Adelino
Duke University ( email )
Duke Innovation & Entrepreneurship Initiative ( email )
215 Morris St., Suite 300
Durham, NC 27701
United States

Antoinette Schoar
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Felipe Severino (Contact Author)
Tuck School of Business at Dartmouth ( email )
Hanover, NH 03755
United States
HOME PAGE: http://www.dartmouth.edu/~fseverino
Feedback to SSRN


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