Unemployment as an Adverse Trigger Event for Mortgage Default

Posted: 17 Dec 2015

See all articles by Chao Yue Tian

Chao Yue Tian

SWUFE

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

Multiple version iconThere are 2 versions of this paper

Date Written: December 16, 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 exerience

Suggested Citation

Tian, Chao Yue and Quercia, Roberto G. and Riley, Sarah, Unemployment as an Adverse Trigger Event for Mortgage Default (December 16, 2015). Journal of Real Estate Finance and Economics, Vol. 52, No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2704428

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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