Mortgage Default and Prepayment Risks Among Moderate and Low Income Households

Real Estate Economics, Forthcoming

58 Pages Posted: 26 Oct 2011

See all articles by Roberto Quercia

Roberto Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning

Anthony Pennington-Cross

Marquette University - Dept. of Finance

Chao Yue Tian

SWUFE

Multiple version iconThere are 4 versions of this paper

Date Written: July 25, 2011

Abstract

Utilizing a unique sample of community reinvestment loans, we study the propensity of very low income households to default or prepay on a mortgage and compare it to the outcomes for low income and moderate income households. The results indicate that, even within moderate and low income segments, lower or very low income is associated with higher default and lower prepayment probabilities. In addition, depending on how low the borrower’s income is, classic determinants of loan termination such as credit scores, the amount of equity in the home, and local labor market conditions can have different impacts on default and prepayment probabilities.

Keywords: low income, mortgage, credit score, default, prepayment

JEL Classification: D12, R2

Suggested Citation

Quercia, Roberto G. and Pennington-Cross, Anthony N. and Tian, Chao Yue, Mortgage Default and Prepayment Risks Among Moderate and Low Income Households (July 25, 2011). Real Estate Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1949234

Roberto G. Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning ( email )

New East Building
Chapel Hill, NC 27599-3140
United States
919-962-4766 (Phone)
Not available (Fax)

Anthony N. Pennington-Cross (Contact Author)

Marquette University - Dept. of Finance ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Chao Yue Tian

SWUFE ( email )

China

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