Unemployment as an Adverse Trigger Event for Mortgage Default

41 Pages Posted: 2 Mar 2015 Last revised: 3 Mar 2015

See all articles by Roberto Quercia

Roberto Quercia

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

Sarah Riley

University of North Carolina (UNC) at Chapel Hill

Chao Yue Tian

SWUFE

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2015

Abstract

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

Quercia, Roberto G. and Riley, Sarah and Tian, Chao Yue, Unemployment as an Adverse Trigger Event for Mortgage Default (March 1, 2015). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2571979

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)

Sarah Riley

University of North Carolina (UNC) at Chapel Hill ( email )

1700 Martin Luther King Blvd.
Suite 129, Campus Box 3452
Chapel Hill, NC 27599-3452
United States

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