Why Mortgage Borrowers Persevere: An Explanation of First and Second Lien Performance Mismatch
| Autor: | Robert F. Sarama, Paul S. Calem |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
Economics and Econometrics
050208 finance Financial economics media_common.quotation_subject Collateralized debt obligation 05 social sciences Equity (finance) Monetary economics Payment Market liquidity Incentive Accounting 0502 economics and business Negative equity Economics Default 050207 economics Second lien loan Finance media_common |
| Zdroj: | Real Estate Economics. 45:28-74 |
| ISSN: | 1080-8620 |
| Popis: | Borrowers with a pair of mortgages collateralized by the same property sometimes continue to make payments on one while defaulting on the other. We articulate a framework for understanding this performance mismatch that emphasizes two types of borrowers: those with stable equity positions who perceive they are facing moderate or temporary liquidity shocks, and those facing severe financial stress in combination with negative equity. The former have an incentive to enter mismatch and subsequently cure, while the latter would default on both contracts. Our empirical analysis using newly available, national samples of matched first- and second-lien mortgages supports this view. |
| Databáze: | OpenAIRE |
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