How Many in Negative Equity? The Role of Mortgage Contract Characteristics
13 Pages Posted: 24 Jul 2012
Date Written: December 8, 2008
An important precondition for mortgage default is that the borrower currently have negative equity, that is, that the mortgage balance be higher than the value of the property. This feature shows how sensitive the percentage of households in negative equity can be to different aspects of the mortgage contract. The recent large rise in mortgage delinquency and default rates in the United States, compared with the situation in other countries, can be partly explained by the fact that US mortgages were more likely to have characteristics that increased the incidence of negative equity.
JEL Classification: G21, R21
Suggested Citation: Suggested Citation