Bowling Alone, Buying Alone: The Decline of Co-borrowers in the US Mortgage Market

43 Pages Posted: 7 May 2020 Last revised: 20 Aug 2020

Date Written: April 16, 2020

Abstract

Using the universe of mortgage applications data in the US, we document that since the early 1990s there was a significant decline in the share of mortgages with a co-borrower. The decline, despite being a universal phenomenon across the US, evinced significant spatial heterogeneity and contributed to the divergence in economic outcomes across different regions. We show that the presence of a co-borrower reduces the mortgage default probability by more than 50 percent for both prime and subprime mortgages and those regions that had a lower co-borrower share prior to the financial crisis experienced higher mortgage default rates over the period 2007-2010. Further, a lower co-borrower share at the local level was related to persistently lower house price growth, refinancing growth and mortgage credit growth.

Keywords: Mortgage market, Co-borrowers, Mortgage Default, House prices, Lending standards

JEL Classification: G21, G51, R21

Suggested Citation

Jakucionyte, Egle and Singh, Swapnil, Bowling Alone, Buying Alone: The Decline of Co-borrowers in the US Mortgage Market (April 16, 2020). Available at SSRN: https://ssrn.com/abstract=3577436 or http://dx.doi.org/10.2139/ssrn.3577436

Egle Jakucionyte (Contact Author)

Bank of Lithuania, CEFER ( email )

Totoriu g. 4
Vilnius, LT-01121
Lithuania

Swapnil Singh

Bank of Lithuania ( email )

Totoriu g. 4
Vilnius, LT-01121
Lithuania

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