Differential Impacts of Structural and Cyclical Unemployment on Mortgage Default and Prepayment

56 Pages Posted: 31 May 2012 Last revised: 2 Mar 2015

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 2 versions of this paper

Date Written: May 1, 2012

Abstract

The Great Recession (fourth quarter of 2007 through the second quarter of 2009) has been characterized by high rates of foreclosures and unemployment. Using a sample of community reinvestment loans, we examine the impact of structural or long term unemployment and cyclical or short term unemployment on mortgage terminations (default and prepayment). We find that mortgage default and prepayment are more sensitive to structural unemployment than cyclical unemployment. In addition, depending on whether structural unemployment is high or low, borrowers and lenders react differently to the incentives to terminate a loan.

Keywords: Structural and Cyclical Unemployment, Mortgage Default and Prepayment

JEL Classification: D12, G21, R22

Suggested Citation

Quercia, Roberto G. and Pennington-Cross, Anthony N. and Tian, Chao Yue, Differential Impacts of Structural and Cyclical Unemployment on Mortgage Default and Prepayment (May 1, 2012). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2070729 or http://dx.doi.org/10.2139/ssrn.2070729

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

Marquette University - Dept. of Finance ( email )

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
54
Abstract Views
813
rank
393,061
PlumX Metrics