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
Date Written: May 10, 2012
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: Suggested Citation