Unemployment as an Adverse Trigger Event for Mortgage Default
41 Pages Posted: 2 Mar 2015 Last revised: 3 Mar 2015
Date Written: March 1, 2015
There is limited evidence of the role of household-level adverse trigger events in driving mortgage default, and the evidence based on proxies, such as the unemployment rate, is inconsistent. Using a survey of low- and moderate-income homeowners with community reinvestment mortgages, we study how a reported household unemployment experience, as a measure of an adverse trigger event, affects mortgage default. We find that both household unemployment and the local unemployment rate are important predictors of mortgage default. We also find that precautionary savings and the duration of unemployment benefits can moderate mortgage default significantly.
Keywords: Mortgage default, Adverse trigger, Unemployment experience
JEL Classification: D12, G21, R22
Suggested Citation: Suggested Citation