Mortgage Meltdown: Default Sensitivity to Declining Home Values and Loan-to-Value Ratios

Colorado College Working Paper No. 2012-04

9 Pages Posted: 10 May 2012 Last revised: 20 May 2012

Yannick Schindler

Colorado College - Department of Economics and Business

Judith A. Laux

Colorado College - Department of Economics and Business

Date Written: May 10, 2012

Abstract

The current study investigates the recent mortgage crisis to determine whether deteriorating aggregate loan-to-value (LTV) ratios resulted in more acute default responses to depreciating home prices. We find evidence that default rates did not behave erratically or disproportionately to falling housing values during the subprime crisis, but we found some proof that the aggregate LTV ratio was associated with increased foreclosure rate volatility.

Keywords: Mortgage Crisis, Default, Home Values, Loan to Value Ratios

JEL Classification: G21, R2

Suggested Citation

Schindler, Yannick and Laux, Judith A., Mortgage Meltdown: Default Sensitivity to Declining Home Values and Loan-to-Value Ratios (May 10, 2012). Colorado College Working Paper No. 2012-04. Available at SSRN: https://ssrn.com/abstract=2055857 or http://dx.doi.org/10.2139/ssrn.2055857

Yannick Schindler

Colorado College - Department of Economics and Business ( email )

14 E Cache La Poudre Street
Colorado Springs, CO 80903
United States

Judith A. Laux (Contact Author)

Colorado College - Department of Economics and Business ( email )

14 E Cache La Poudre Street
Colorado Springs, CO 80903
United States
7193896414 (Phone)
7193896927 (Fax)

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