Income Stability and Mortgage Default

27 Pages Posted: 19 Jul 2017

See all articles by Meagan McCollum

Meagan McCollum

University of Tulsa - Collins College of Business

R. Kelley Pace

Louisiana State University - E.J. Ourso College of Business Administration

Date Written: July 10, 2017

Abstract

Debate exists on the relative importance of employment status and house price declines in accounting for the large number of mortgage defaults during the Great Recession.

To avoid the complexities posed by potential interactions among house prices, employment status, and income, we propose the natural experiment of examining the default decisions of homeowners with job security and income stability. Specifically, we observe public sector workers employed in Clark County, Nevada in FY2009-2010 and examine the sensitivity of their default decisions to changes in house values relative to borrowers in the private sector. Compared to the overall population, homeowners with known employment and income stability exhibit both a lower rate of default as well as a lower sensitivity to mortgage leverage in their default decisions.

Keywords: mortgages, default, public records

JEL Classification: D14, G21, R30

Suggested Citation

McCollum, Meagan and Pace, R. Kelley, Income Stability and Mortgage Default (July 10, 2017). Available at SSRN: https://ssrn.com/abstract=3001218 or http://dx.doi.org/10.2139/ssrn.3001218

Meagan McCollum (Contact Author)

University of Tulsa - Collins College of Business ( email )

600 South College
Tulsa, OK 74104
United States

R. Kelley Pace

Louisiana State University - E.J. Ourso College of Business Administration ( email )

Department of Finance
2164 B Patrick F. Taylor Hall
Baton Rouge, LA 70803-6308
United States
(225)-578-6256 (Phone)
(225)-578-9065 (Fax)

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