Mortgage Defaults

By Leonardo Martinez, Juan Carlos Hatchondo, Juan M. Sanchez

January 1, 2012

Preview Citation

Format: Chicago

Leonardo Martinez, Juan Carlos Hatchondo, and Juan M. Sanchez Mortgage Defaults, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model. The model is calibrated to match U.S. data and accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. The average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing but housing increases the values of these coefficients for younger agents. The response of consumption to house price shocks is minimal. The introduction of minimum down payments or income garnishment benefits a majority of the population.

Subject: Consumption, Financial institutions, Housing, Housing prices, Income, Mortgages, National accounts, Prices

Keywords: Consumption, Default, Default decision, Default rate, Down payment, Garnishment, Home equity, House price shock, Housing, Housing prices, Income, Insurance coefficient, Life cycle, Mortgage, Mortgages, Payment obligation, Price level, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/026
Stock No:

WPIEA2012026
ISBN:

9781463932534
ISSN:

1018-5941

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